Defence Portfolio Additional Estimates Statements 2008-2009 · The purpose of the Portfolio Additional Estimates Statements (PAES), like that of the Portfolio Budget Statements, is

PORTFOLIO ADDITIONAL ESTIMATES STATEMENTS 2008-09

DEFENCE PORTFOLIO

EXPLANATIONS OF ADDITIONAL ESTIMATES 2008-09

© Commonwealth of Australia 2008

ISBN 978-0-642-29693-1

This work is copyright. Apart from any use as permitted under the Copyright Act 1968, no part may be reproduced by any process without prior written permission from the Commonwealth. Requests and inquiries concerning reproduction and rights should be addressed to the:

Commonwealth Copyright Administration Attorney-General’s Department Robert Garran Offices National Circuit BARTON ACT 2600

Or posted at Website: www.ag.gov.au/cca

Printed by: Blue Star Print

THE MINISTER FOR DEFENCE THE HON JOEL FITZGIBBON MP

28 NOV 1008 President of the Senate Australian Senate Parliament House CANBERRA ACT 2600

Speaker House of Representatives Parliament House CANBERRA ACT 2600

Dear Mr President and Mr Speaker

I hereby submit Portfolio Additional Estimates Statements in support of the 2008-09 Additional Estimates for the Department of Defence, the Defence Materiel Organisation and Defence Housing Australia.

These statements have been developed, and are submitted to the Parliament, as a statement on the funding requirements being sought for the Defence Portfolio.

I present these statements by virtue of my ministerial responsibility for accountability to the Parliament and, through it, the public.

Yours sincerely

~ON

TABLE OF CONTENTS

User Guide ....................................................................................................................ix Structure of the Portfolio Additional Estimates Statements .................................... xii

Portfolio Overview.....................................................................................................xvii

PART ONE – DEPARTMENT OF DEFENCE

Section One – Defence overview and resources Chapter One - Overview .........................................................................................5 Overview ...................................................................................................................7 Strategic direction .....................................................................................................7 Overview of the 2008-09 Additional Estimates .........................................................7 Organisational structure..........................................................................................11

Chapter Two - Resourcing ...................................................................................13 Defence resourcing.................................................................................................15 Defence resourcing statement ................................................................................17 Funding from Government ......................................................................................19 Funding from other sources ....................................................................................23 Funding for operations ............................................................................................24 Appropriations .........................................................................................................27 Payments to Defence Materiel Organisation ..........................................................28 Payments to Defence Housing Australia ................................................................29

Chapter Three – Defence Reform........................................................................31

Chapter Four – Capital Investment Program .....................................................33 Overview .................................................................................................................35 Defence Capability Plan..........................................................................................36 The Approved Major Capital Investment Program..................................................36 Capital facilities projects .........................................................................................37 Other investments...................................................................................................49 Capital receipts .......................................................................................................49

Chapter Five - People ...........................................................................................51 Workforce overview ................................................................................................53 Workforce summary................................................................................................53

v

Section Two – Outcomes and planned performance Chapter Six – Planned Outcome Performance ..................................................59 Outcomes and performance information ................................................................61 Output descriptions .................................................................................................61 Outcome One – Australia’s national interests are protected and advanced through the provision of military capabilities and the promotion of security and stability ....64

Output Group 1.1 – Office of the Secretary and CDF................................................... 66 Output Group 1.2 – Navy capabilities........................................................................... 67 Output Group 1.3 – Army capabilities........................................................................... 69 Output Group 1.4 – Air Force capabilities .................................................................... 70 Output Group 1.5 – Intelligence capabilities................................................................. 71 Output Group 1.6 – Defence Support.......................................................................... 72 Output Group 1.7 – Defence Science and Technology ................................................ 73 Output Group 1.8 – Chief Information Officer............................................................... 74 Output Group 1.9 – Vice Chief of the Defence Force................................................... 75 Output Group 1.10 – Joint Operations Command ........................................................ 76 Output Group 1.11 – Capability Development.............................................................. 77 Output Group 1.12 – Chief Finance Officer .................................................................. 78 Output Group 1.13 – People Strategies and Policy...................................................... 79 Output Group 1.14 – Superannuation and Housing Support Services for Current and Retired Defence Personnel and other Administered Items........................................... 80

Outcome Two – Military operations and other tasks directed by the Government to achieve the desired results .....................................................................................81

Resource statement ..................................................................................................... 81 Output Group 2.1 – Operations contributing to the security of the immediate neighbourhood ............................................................................................................. 82 Output Group 2.2 – Operations supporting wider interests .......................................... 83

Outcome Three – Defence’s support to the Australian community and civilian authorities to achieve the desired results ...............................................................84

Resource statement ..................................................................................................... 84 Output Group 3.1 – Defence contribution to National Support Tasks in Australia ........ 85

Section Three – Explanatory Tables and Financial Statements Chapter Seven – Explanatory Tables and Budgeted Financial Statements ...89 Explanatory Tables .................................................................................................91 Australian Government Indigenous expenditure.....................................................92 Discretionary Grants ...............................................................................................93 Budgeted Financial Statements ..............................................................................94 Analysis of Departmental budgeted financial statements.......................................94 2008-09 Departmental budgeted financial statement...........................................100 Analysis of administered activity ...........................................................................106 2008-09 schedule of administered activity............................................................107 Notes to the budgeted financial statements..........................................................110

vi

PART TWO – DEFENCE MATERIEL ORGANISATION

Section One – Defence Materiel Organisation overview and resources Chapter One – Defence Materiel Organisation overview................................123 Overview ...............................................................................................................125 Overview of the 2008-09 Budget ..........................................................................125 Organisational structure........................................................................................125

Chapter Two – Defence Materiel Organisation resourcing ............................127 Resourcing for 2008-09 ........................................................................................129

Chapter Three – Management reforms and governance ................................133 Governing the DMO ..............................................................................................135

Chapter Four – Defence Materiel Organisation people...................................137

Section Two – Defence Materiel Organisation outcomes and planned performance

Chapter Five – Planned outcome performance ...............................................143 Outcome and Performance Information................................................................145 Summary of outcome and contribution to outcome ..............................................145 Performance and evaluation information for the DMO outcome ..........................146

Section Three – Defence Materiel Organisation explanatory tables and financial statements

Chapter Six – Explanatory tables ......................................................................175 Explanatory Tables ...............................................................................................177 Estimates of variations to Average Staffing Level ................................................178

Chapter Seven – Budgeted financial statements ............................................179 Analysis of budgeted financial statements............................................................181 Notes to the budgeted financial statements..........................................................186

PART THREE – DEFENCE HOUSING AUSTRALIA Overview ...............................................................................................................188 Budgeted financial statements..............................................................................188

vii

viii

USER GUIDE TO THE

PORTFOLIO ADDITIONAL ESTIMATES STATEMENTS

User Guide

USER GUIDE

The purpose of the Portfolio Additional Estimates Statements (PAES), like that of the Portfolio Budget Statements, is to inform Senators and Members of Parliament and the public of the proposed allocation of resources to Government outcomes by agencies within the portfolio. However, unlike the Portfolio Budget Statements, the PAES summarise only the changes in resourcing by outcome since the Budget, that is, they update the resourcing for the agency. The PAES include for the first time an Agency Resource Statement, in addition to the information on new measures and the Appropriation Bills.

The PAES facilitate understanding of the proposed appropriations in Appropriation Bills (No. 3 and No. 4) 2008-09. In this sense the PAES is declared by the Additional Estimates Appropriation Bills to be a ‘relevant document’ to the interpretation of the Bills according to section 15AB of the Acts Interpretation Act 1901.

Whereas the Mid-Year Economic and Fiscal Outlook 2008-09 is a mid-year budget report which provides updated information to allow the assessment of the Government’s fiscal performance against its fiscal strategy, the PAES update the most recent budget appropriations for agencies within the portfolio.

xi

User Guide

STRUCTURE OF THE PORTFOLIO ADDITIONAL ESTIMATES STATEMENTS

The PAES are presented in three parts with subsections.

Chapter One Overview Chapter One provides an update of Defence’s budget, Defence’s strategic objectives and environment, and Defence’s organisational structure.

Chapter Two Resourcing Chapter Two provides an update of Defence’s finances for 2008 09, including a revision of Defence’s budget and measures, and an update of Defence’s purchaser provider arrangements.

Chapter Three Defence Reform Chapter Three provides an update of the implementation of internal reforms and efficiencies.

Chapter Four Capital Investment Chapter Four provides an update of Defence’s capital budget Program including medium and major capital facilities projects, other capital

purchases and capital receipts.

Chapter Five People Chapter Five provides an update on Defence’s personnel initiatives and workforce summary.

Chapter Six Planned Outcome Chapter Six provides an update of the cost and performance targets Performance for Defence’s outcomes and outputs.

Chapter Seven Explanatory Tables Chapter Seven provides an update of Defence’s budgeted financial and Budgeted Financial Statements statements.

PART TWO: DEFENCE MATERIEL ORGANISATION

Chapter One Overview The overview provides an update of the Defence Materiel Organisation’s (DMO) challenges and opportunities, and structure.

Chapter Two Resourcing The resourcing chapter provides an update on the DMO’s appropriations, cost recovery arrangements and purchaser provider arrangements.

Chapter Three Management Reforms This chapter provides an update of the DMO’s reforms. and Governance

Chapter Four People This chapter provides an update of the DMO’s personnel initiatives and the organisation’s workforce overview.

Chapter Five Planned Outcome This chapter provides an update of the DMO’s outcome and outputs, Performance planned performance targets and planned evaluations.

Chapter Six Explanatory Tables This chapter provides an update of the DMO’s budgeted financial statements.

PART THREE: DEFENCE HOUSING AUSTRALIA

This section provides an update of Defence Housing Australia’s performance forecasts, outcome and output information, and budgeted financial statements.

APPENDIX

A list of tables and figures, a glossary and a list of acronyms and abbreviations.

xii

User Guide

STYLES AND CONVENTIONS

(a) The following notations may be used:

NEC/nec not elsewhere classified

AEST Australian Eastern Standard Time

- nil

.. not zero, but rounded to zero

na not applicable (unless otherwise specified)

nfp not for publication

$m $ million

(b) Figures in tables and in the text may be rounded. Discrepancies in tables between totals and sums of components are due to rounding.

INQUIRIES

Should you have any inquiries regarding this publication please contact

Director Ministerial and Parliamentary Reporting R1-5-A036 Department of Defence CANBERRA ACT 2600

Telephone: (02) 6265 6277 Email: [email protected]

A copy of this document can be located on the Australian Government Budget website at www.budget.gov.au and the Defence website at www.defence.gov.au/budget.

REFERENCES

Previous years’ Defence Portfolio Budget Statements, Portfolio Additional Estimates Statements and Annual Reports can be found at www.defence.gov.au/budget.

xiii

PORTFOLIO OVERVIEW

Portfolio Overview

PORTFOLIO OVERVIEW

The Department of Defence’s portfolio structure and outcomes remain as reported in the Portfolio Budget Statements 2008-09.

xvii

PART ONE

DEPARTMENT OF DEFENCE

SECTION ONE

DEFENCE OVERVIEW AND RESOURCES

CHAPTER ONE —OVERVIEW

OVERVIEW

STRATEGIC DIRECTION

OVERVIEW OF THE 2008-09 ADDITIONAL ESTIMATES

ORGANISATIONAL STRUCTURE

Chapter One - Overview

OVERVIEW AND STRATEGIC DIRECTION

The overview and strategic direction for the Department of Defence remain as reported in the Portfolio Budget Statements 2008-09.


As part of the 2008-09 Budget, the Government provided $13.4b in new funding to Defence over a 10 year period. This included additional funding for Defence operations in Iraq, East Timor and Afghanistan in the forward estimates period and the continuation of the Government’s commitment to the three per cent per annum real growth in funding to Defence through to 2017-18. Defence’s supplementation for price indexation and the newly established Savings and Efficiency Program funded all other budget measures and the 2008-09 costs of operations.

Significant changes since the 2008-09 Budget Defence’s funding across 10 years has increased by $8.1b since the 2008-09 Budget. The major contributor to this is an increase of $7,963.2m for a range of budget adjustments, including $12,309.0m for movements in foreign exchange and a reduction of $4,286.9m for movements in price.

In addition there are five measures which affect Defence funding:

• $3.0m for Australia’s contribution to the United Kingdom-led initiative to augment helicopter capability in Afghanistan

• $92.3m for the net additional cost of extending Operation Catalyst until 30 June 2009 • $15.5m for infrastructure upgrades in the Middle East • $0.2m for implementation of Operation Sunlight • a reduction of $5.1m for a reduced Austr alian Defence Force (ADF) presence in East Timor.

Variations in Defence funding over 10 years are shown in Table 1.1.1 below and further details are provided in Chapter Two – Resourcing.

7

Table 1.1.1—Additional departmental funding provided to Defence since the 2008-09 Budget 2008-09

$m 2009-10

$m 2010-11

$m 2011-12

$m Total FE

$m 2012-13

$m 2013-14

$m 2014-15

$m 2015-16

$m 2016-17

$m 2017-18

$m Total

$m Additional Measures (2008-09 MYEFO outturned prices)

Expenditure Measures

Afghanistan – helicopter capability 3.0 - - - 3.0 - - - - - - 3.0 Australian Strategic Policy Institute – continuation of funding Electronic countermeasures equipment

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-Iraq – contribution to international stabilisation activities 92.3 - - - 92.3 - - - - - - 92.3 Operations in the Middle East – operational efficiencies project - - - - - - - - - - - -Operations in the Middle East – infrastructure upgrade and expansion 15.5 - - - 15.5 - - - - - - 15.5

Implementation of Operation Sunlight 0.2 - - - 0.2 - - - - - - 0.2

1 Sub-total expenditure measures 111.0 - - - 111.0 - - - - - - 111.0

Savings Measures

East Timor – reduced ADF presence -5.1 - - - -5.1 - - - - - - -5.1

2 Sub-total savings measures -5.1 - - - -5.1 - - - - - - -5.1

3 Total budget measures (1+2) 105.8 - - - 105.8 - - - - - - 105.8

Update of price indexation[1]

Other budget adjustments (2008-09 Budget outturned prices)

-18.2 -149.2 -155.0 -423.7 -746.1 -466.1 -504.6 -544.9 -599.3 -657.7 -768.2 -4,286.9

Foreign exchange movements[1] 582.7 1,347.7 1,337.0 1,185.9 4,453.3 1,158.8 1,127.6 1,218.2 1,329.4 1,440.0 1,581.7 12,309.0 Reprogramming of the Enhanced Land Force (ELF) -207.8 -69.4 9.7 231.2 -36.3 -37.9 74.4 6.7 5.5 5.6 -0.4 17.6 Reprogramming of the Approved

[2] Major Capital Investment ProgramReinvestment of savings from Approved Major Capital Investment Program[2]

-514.0

-

-

-

217.5

-

-564.0

-

-860.5

-

98.0

-

-35.0

-

-295.0

56.0

73.0

-

-524.0

-

1,538.0

-

-5.5

56.0

Reprogramming of intelligence project -6.3 - - - -6.3 - - - - 7.4 - 1.1

Efficiency Dividend - adjustment -1.8 -2.9 -3.9 - -8.5 - - - - - - -8.5 Bring forward of 2007-08 reprogramming 307.0 - - - 307.0 - -220.6 -117.6 - - - -31.2 Bring forward of 2007-08 reprogramming - operations[3] - - - - - -166.0 - - - - - -166.0

2008-09 $m

2009-10 $m

2010-11 $m

2011-12 $m

Total FE $m

2012-13 $m

2013-14 $m

2014-15 $m

2015-16 $m

2016-17 $m

2017-18$m

Total $m

Reconciliation of 2007-08 operations expenditure Defence Home Ownership Assistance Scheme[4]

29.4 - - -

1.8 2.3 3.1 4.0

29.4

11.2

- - - - - - 29.4

4.9 5.9 6.2 6.5 6.8 6.8 48.3

4 Total other budget adjustments[5] 172.8 1,128.5 1,408.4 433.4 3,143.0 591.7 447.7 329.6 815.1 278.1 2,357.9 7,963.2

5 Total additional funding (3+4)[5] 278.6 1,128.5 1,408.4 433.4 3,248.9 591.7 447.7 329.6 815.1 278.1 2,357.9 8,069.0 Notes 1. Price and foreign exchange convert the other budget adjustments into 2008-09 MYEFO outturned prices. 2. The $514m reprogrammed from 2008-09 under the Approved Major Capital Investment Program includes $50m of cost savings which will be harvested for investment in 2014-15 ($56m outturned). 3. $155m for operations not spent in 2007-08 has been brought forward from 2012-13 ($166m outturned) and returned to Government. 4. The Defence Home Ownership Assistance Scheme adjustment is a transfer from administered to departmental appropriation (refer to serial 11 Table 1.2.1) which has no change on total

resourcing. 5. 2008-09 MYEFO outturned prices as a result of application of price and foreign exchange adjustments.


Table 1.1.2—Additional estimates and variations to outcomes from measures since 2008-09 Budget (2008-09 MYEFO outturned prices)

2008-09 2009-10 2010-11 2011-12 Output Revised Forward Forward Forward Group Estimate Estimate Estimate Estimate

Impacted $'000 $'000 $'000 $'000 Outcome 1 Increase in estimates (departmental) Implementation of Operation Sunlight 1.12 244 - - -Net impact on estimates for Outcome 1 (departmental) 244 - - -Outcome 2 Increase in estimates (departmental)

Afghanistan – helicopter capability 2.2 3,000 - - -

Iraq – contribution to international stabilisation activities 2.2 92,252 - - -

Operations in the Middle East – infrastructure upgrade and expansion 2.2 15,466 - - -

Decrease in estimates (departmental) East Timor – reduced Australian Defence Force presence 2.2 -5,145 - - -Net impact on estimates for Outcome 2 (departmental) 105,573 - - -

Table 1.1.3—Additional estimates and variations to outcomes from other variations (2008-09 Budget outturned prices)

2008-09 2009-10 2010-11 2011-12 Output Revised Forward Forward Forward Group Estimate Estimate Estimate Estimate

Impacted $'000 $'000 $'000 $'000 Outcome 1 Increase in estimates (departmental) Foreign exchange movements[1] Various 582,737 1,347,658 1,337,009 1,185,862 Bring forward of 2007-08 reprogramming Various 307,000 - - -Reprogramming of the ELF Various - - 9,677 231,193 Reprogramming of the Approved Major Capital Investment Program [2] 1.11 - - 217,500 -Defence Home Ownership Assistance Scheme 1.14 1,770 2,310 3,100 3,980 Decrease in estimates (departmental) Update of price indexation[1] Various -18,199 -149,231 -154,969 -423,740 Efficiency Dividend adjustment Various -1,776 -2,887 -3,870 -Reprogramming of intelligence project 1.3 -6,285 - - -Reprogramming of the ELF Various -207,797 -69,419 - -Reprogramming of the Approved Major Capital Investment Program [2] 1.11 -514,000 - - -564,000 Net impact on estimates for Outcome 1 (departmental)[3] 143,450 1,128,431 1,408,447 433,295

Outcome 2 Increase in estimates (departmental)Reconciliation of 2007-08 operations expenditure 2 29,353 - - -Net impact on estimates Outcome 2 (departmental)[3] 29,353 - -

Notes 1. Price and foreign exchange convert the other budget adjustments into 2008-09 MYEFO outturned prices. 2. The $514m reprogrammed from 2008-09 under the Approved Major Capital Investment Program includes $50m of cost

savings which will be harvested for investment in 2014-15 ($56m outturned). 3. 2008-09 MYEFO outturned prices as a result of application of price and foreign exchange adjustments.

10



Senior executive changes Professor Robert Clark was appointed to the position of Chief Defence Scientist on 13 October 2008.

Organisational structure changes The organisational structure remains as reported on the Portfolio Budget Statements 2008-09.

Organisational structure Figure 1.1 (on the following page) depicts the organisational structure as at 2 December 2008.

11

Figure 1.1 —Defence organisational chart as at 2 December 2008

Minister for Defence Hon Joel Fitzgibbon MP

Minister for Defence Science and Personnel

The Hon Warren Snowdon MP

Parliamentary Secretary Defence Procurement

The Hon Greg Combet AM MP

Parliamentary Secretary Defence Support

he Hon Dr Mike Kelly AM MP

Secretary Mr Nick Warner

****

(1)

Chief of the Defence Force ACM Angus Houston

****

(1)

Offic e of the Secretary & Chief of Defence Force Group

Judge Advocate General MAJGEN The Hon Justice

Richard Tracey ** (1) (2)

Chief Military Judge BRIG Ian Westwood

* (1) (2)

Director Military Prosecutions BRIG Lyn McDade

* (1) (2)

Inspector Gener al ADF Mr Geoff Earley

** (1) (3)

Inspector General Mr Ray Bromwich

(acting) ** (4)

Deputy Secretary White Paper Mr Michael Pezzullo

***

Deputy Secretary Strategy, Coordination and Governance

Mr Peter Jennings (acting) ***

T

Vice Chief of the Defence Force LTGEN David Hurley

*** (1)

Chief of Joint Operations LTGEN Mark Evans

***

Chief of Navy VADM Russ Crane

*** (1) (5)

Chief of Army LTGEN Ken Gillespie

*** (1) (5)

Chief of Air Force AIRMRSHL Mark Binskin

*** (1) (5)

Chief Capability Development VADM Matthew Tripovich

***

Chief Finance Officer Mr Phillip Prior

***

Chief Information Officer Mr Greg Farr

***

Deputy Secretary Defence Support

Mr Martin Bowles ***

Deputy Secretary Intelligence, Security and International Policy

Mr Stephen Merchant ***

Deputy Secretary People Strategies and Policy

Mr Phil Minns ***

Chief Defence Scientist Professor Robert Clark

***

Defence Materiel Organisation

Chief Executive Officer Dr Stephen Gumley

(6)

General Manager Programs Mr Warren King

***

General Manager Systems Mr Kim Gillis

***

General Manager Corporate Ms Jane Wolfe

***

* Stars refer to ADF Star rank or SES Band levels. (1) Statutory appointment. (2) Reports directly to the Minister for Defence in accordance with Section 196A of the Defence Force Discipline Act 1982. (3) The Inspector-General ADF is directly responsible to the Chief of the Defence Force (CDF).

(4) The Inspector-General reports directly to the Secretary and CDF. (5) Section 9(3) of the Defence Act 1903 requires the Service Chiefs to advise the Minister on matters relating to their command. (6) Under the agreed business model for DMO as a prescribed agency, the CEO DMO Ministerial Directive identifies that the CEO DMO is directly accountable to the Minister for DMO’s performance but remains accountable to the Secretary and CDF.

CHAPTER TWO — RESOURCING

DEFENCE RESOURCING

DEFENCE RESOURCE STATEMENT

FUNDING FROM GOVERNMENT

FUNDING FROM OTHER SOURCES

FUNDING FOR OPERATIONS

PAYMENTS TO DEFENCE MATERIEL ORGANISATION

PAYMENTS TO DEFENCE HOUSING AUSTRALIA

Chapter Two - Resourcing

DEFENCE RESOURCING

Departmental funding (serial 10 of Table 1.2.1 overleaf) is the most common way of presenting the Defence budget. The total level of departmental funding in 2008-09 has increased by $337.6m to $23,027.9m compared with $22,690.3m in the 2008-09 Budget. The revised total Defence funding is comprised of:

• an appropriation for departmental outputs ($20.2b)

• an equity injection ($1.8b)

• drawdown of appropriations carried forward from previous years ($114.7m)

• net capital receipts ($65.7m)

• own source revenue ($811.2m).

The net increase in funding is made up of:

• an increase of $278.6m in departmental appropriations resulting from

o an increase of $105.8m associated with departmental budget measures (refer Serial 3 of Table 1.1.1)

o an increase of $172.8m for other budget adjustments (refer serial 4 of Table 1.1.1)

• an increase of $59.7m in the drawdown of appropriations carried forward (refer Serial 5 of Table 1.2.1) related mainly to using cash to meet the liability for the effect of a stronger Australian dollar on foreign exchange rates in 2007-08

• a decrease of $0.7m in own source revenue (refer Serial 8 in Table 1.2.1).

The 2008-09 revised estimate for total Defence funding of $23,027.9m is 1.5 per cent more than the estimate made in the 2008-09 Budget.

15

Table 1.2.1—Total Defence resourcing 2008-09 to 2011-12 2007-08 Actual Result

$’000

2008-09Budget

estimate $’000

2008-09Revised estimate

$’000 Variation

$’000 %

2009-10Forwardestimate

$’000

2010-11Forwardestimate

$’000

2011-12Forward estimate

$’000 Departmental

19,693,267 Appropriation for departmental outputs 19,392,037 20,231,213 839,176 4.3 20,993,282 21,544,757 21,758,382524,315 Equity injection appropriation 2,365,736 1,805,180 -560,556 -23.7 4,372,754 5,238,354 5,079,786

64,174 Appropriation for previous years’ outputs - - - - - -

20,281,756 Current year’s appropriations 21,757,773 22,036,393 278,620 1.3 25,366,036 26,783,111 26,838,168-

50,000 Drawdown of appropriations carried forward 55,000 114,669 59,669 108.5 60,000 65,000 30,389

20,331,756 Funding fr om Government (4+5) 21,812,773 22,151,062 338,289 1.6 25,426,036 26,848,111 36,342 Net capital receipts 65,662 65,662 - - 66,314 75,791

26,868,557 52,476

766,263 Own source revenue 811,892 811,187 -705 -0.1 828,211 839,789 860,933

802,605 Funding from other sources (7+8) 877,554 876,849 -705 -0.1 894,525 915,580 913,409

21,134,361 Total Defence funding (6+9) 22,690,327 23,027,911 337,584 1.5 26,320,561 27,763,691 27,781,966Administered

2,802,850 Administered special appropriations 2,943,338 2,941,568 -1,770 -0.1 3,056,244 3,173,424 3,292,477 26,800 Appropriation for specific purpose payments 23,300 23,300 - - - - -

2,829,650 Total administered funding 2,966,638 2,964,868 -1,770 -0.1 3,056,244 3,173,424 3,292,477

23,964,011 Total Defence resourcing (10+13) 25,656,965 25,992,779 335,814 1.3 29,376,805 30,937,115

Appropriations carried forward

247,363 Appropriation receivable 158,802 132,694 -26,108 -16.4 72,694 7,694

31,074,443

1,305

32,007 Cash at bank 32,007 29,223 -2,784 -8.7 29,223 29,223 29,223

Total appropriations carried forward 190,809 161,917 -28,892 -15.1 101,917 36,917 30,528

24,243,381

279,370

Total available resourcing [1] (14+17) 25,847,774 26,154,696 306,922 1.2 29,478,722 30,974,032 31,104,971

Ser

ial N

o.

123

4

5

6

78

9

10

1112

13

14

15

16

17

18Notes1. Cross reference to serial 10 in Table 1.2.2.


DEFENCE RESOURCING STATEMENT

1.2.2—Defence Resource Statement - Additional estimates for 2008-09 as at Additional Estimates December 2008[1]

Total Estimate Proposed estimate at Total

Seria

l No.

as at Additional Additional appropriation Budget Estimates Estimates available 2008-09 2008-09 2008-09 2007-08

$’000 + $’000 = $’000 $’000

1

ORDINARY ANNUAL SERVICES Outcome 1 Outcome 2 Outcome 3

Total departmental outputs[2]

Revenue

Cash available

Previous years’ outputs (operating)

18,379,067 1,000,107

12,863 19,392,037

877,554

32,007

213,802

720,217 118,959

-839,176

-705

-2,784

-114,441

19,099,284 1,119,066

12,863 20,231,213

876,849

29,223

99,361

18,040,102 1,617,682

35,483 19,693,267

802,605

32,007

149,361

2 Total ordinary annual services 20,515,400 721,426 21,236,646 20,677,240

3

OTHER SERVICES Administered expenses Specific purpose payments to States, ACT, NT and local government

Outcome 1

Total administered expenses[3] 23,300

23,300 -

-23,300

23,300 26,800

26,800 Departmental non-operating

4 Equity injections 2,365,736 -560,556 1,805,180 524,315 5 Previous years' outputs - 148,002 148,002 212,176 6 Total departmental non-operating (4+5)[3] 2,365,736 -412,554 1,953,182 736,491

7 Total other services (3+6) 2,389,036 -412,554 1,976,482 763,291

8 Total available annual appropriation (2+7) 22,904,436 308,692 23,213,128 21,440,531 SPECIAL APPROPRIATIONS Special appropriations limited by criteria/entitlement Defence Force Retirement Benefits Act 1948 Part VIC, s.82ZJ(1)[4] 91,430 - 91,430 91,639

Defence Force Retirement and Death Benefits Act 1973 Part XII, s.125(3)[4]

Military Superannuation and Benefits Act 1991 Part V, s.17[4]

Defence Force (Home Loans Assistance) Act 1990 Part IV, s.38 Defence Home Ownership Assistance Scheme Act 2008 Part VI, s.84

1,439,070

1,360,200

52,638

-

-

-

-41,638

39,868

1,439,070

1,360,200

11,000

39,868

1,442,361

1,257,600

11,250

-Parliamentary Entitlements Act 1990 Part I, s.11 - - - -

9 Total special appropriations 2,943,338 -1,770 2,941,568 2,802,850

10 Total appropriations excluding special accounts (8+9) 25,847,774 306,922 26,154,696 24,243,381 Special Accounts Opening balance [4] 48,399 13,380 61,779 29,096 Appropriation receipts - - * -Non-Appropriation receipts 48,439 715 49,154 68,363

11 Total Special Accounts 96,838 14,095 110,933 97,459 Notes 1. All figures are GST exclusive. 2. Appropriation Bill (No. 1 and 3) 2008-09. 3. Appropriation Bill (No. 2 and 4) 2008-09. 4. These are accrual estimates which differ from the planned cash payments.

17


Table 1.2.3—Third party drawdowns from and on behalf of other agencies 2008-09

$’000

Drawdowns Revenue received from the Defence Materiel Organisation for the provision of services 328,744

Payments made to the Defence Materiel Organisation for the provision of goods and services 9,370,899

Payments made to Defence Housing Australia for the provision of services (departmental) 542,198

Payments made to the Department of Veterans’ Affairs for the provision of services (departmental) 2,661

18


FUNDING FROM GOVERNMENT

2008-09 Additional Measures Since the 2008-09 Budget, the Government has approved 8 new measures for Defence. Table 1.2.4 shows the additional measures approved by the Government since the 2008-09 Budget. These measures are detailed in subsequent paragraphs.

Table 1.2.4—Defence 2008-09 additional measures[1][2]

2008-09 2009-10 2010-11 2011-12 Output Revised Forward Forward Forward Group estimate estimate estimate estimate Total

$'000 $'000 $'000 $'000 $'000 Expense Measures Departmental Measures Australian Strategic Policy Institute – continuation of funding 1.1 - - - - -Afghanistan – helicopter capability 2.2 3,000 - - - 3,000 Electronic countermeasures equipment 2.2 - - - - -Iraq – contribution to international stabilisation activities 2.2 87,764 - - - 87,764 Operations in the Middle East – operational efficiencies project 2.2 - - - - -Operations in the Middle East – infrastructure upgrade and expansion 2.2 3,987 - - - 3,987 Implementation of Operation Sunlight 1.12 244 - - - 244 East Timor – reduced Australian Defence Force presence 2.2 -5,145 - - - -5,145

1 Sub-total Departmental Measures 89,850 89,850 Administered Measures

- - - - -2 Sub-total administered measures - - - - -3 Total Expense Measures (1+2) 89,850 - - - 89,850

Capital Measures Electronic countermeasures equipment 2.2 - - - - -Iraq – contribution to international stabilisation activities 2.2 4,488 - - - 4,488 Operations in the Middle East -infrastructure upgrade and expansion 2.2 11,479 - - - 11,479

4 Total Capital Measures 15,967 - - - 15,967 5 Total new budget measures (3+4) 105,817 - - - 105,817 Notes 1. Measures are reported on a Government Financial Statistics basis. Where Defence absorbs the cost of a measure, the

fiscal impact is zero. 2. Cross reference to Table 1.1.1 for the total cost of those measures with expense and capital elements.

AUSTRALIAN STRATEGIC POLICY INSTITUTE – CONTINUATION OF FUNDING

The Government will provide $2.8m in 2008-09 to support the work of the Australian Strategic Policy Institute (ASPI). The ASPI produces independent analysis of defence and security issues relevant to Australia to support government decision-making in strategic and defence issues. The cost of this measure will be met from within the existing resourcing of Defence.

19


AFGHANISTAN – HELICOPTER CAPABILITY

The Government will provide $3.0 million in 2008-09 as Australia’s contribution to the United Kingdom-led initiative to augment helicopter capability in Afghanistan. The contribution gives effect to a commitment made at the North Atlantic Treaty Organisation (NATO) summit held in Bucharest in April 2008. The contribution will fund advanced pilot training and technical upgrades to enable more NATO helicopters to be deployed to Afghanistan in support of International Security Assistance Force operations.

ELECTRONIC COUNTERMEASURES EQUIPMENT

The Government will provide $76.2m (including capital funding of $67.2m) over two years from 2008-09 for electronic countermeasures equipment. This equipment is for the protection of Australian Defence Force personnel, including in Afghanistan and Iraq. The equipment will provide an enhanced level of protection against improvised explosive devices. The cost of this measure will be met from within the existing resourcing of Defence.

IRAQ – CONTRIBUTION TO INTERNATIONAL STABILISATION ACTIVITIES

The Government will provide $92.3m in 2008-09 (including $4.5m for capital) for the net additional costs of extending Operation CATALYST until 30 June 2009. The operation is Australia’s military contribution to stabilisation and reconstruction activities in Iraq.

OPERATIONS IN THE MIDDLE EAST – COMMAND AND CONTROL ENHANCEMENT

In 2007-08, Defence initiated a study to scope options for improving the delivery of robust operational support measures to deployed forces in the Middle East. The Government will provide $17.2m, being $1.7m for the scoping study and $15.5m for the phased delivery of enhanced infrastructure and consolidation of resources. The cost of the scoping study will be met from within Defence resources.

IMPLEMENTATION OF OPERATION SUNLIGHT

The Government will provide $0.2m in 2008-09 for implementation of Operation Sunlight to improve budget transparency.

EAST TIMOR – REDUCED AUSTRALIAN DEFENCE FORCE PRESENCE

The Government has decided that the Australian Defence Force presence in East Timor will be reduced from approximately 750 to 650 personnel by early 2009, reflecting improvements in the country’s security situation. This reduction is expected to lead to a saving of $5.1m in 2008-09 in respect of allowances and logistics support costs.

20


Other budget adjustments In addition to the above measures, the following adjustments will be made to Defence’s Departmental estimates.

Table 1.2.5—Variations in Defence funding provided by the Government since the 2008-09 Budget[1] (2008-09 Budget outturned prices)

2008-09 2009-10 2010-11 2011-12 Revised Forward Forward Forward estimate estimate estimate estimate Total

Outcome $’000 $’000 $’000 $’000 $'000 Other budget adjustments Update of price indexation[2] 1 -18,199 -149,231 -154,969 -423,740 -746,139Foreign exchange movements[2] 1 582,737 1,347,658 1,337,009 1,185,862 4,453,266Reprogramming of the Enhanced Land Force (ELF) 1 -207,797 -69,419 9,677 231,193 -36,346Reprogramming of the Approved Major Capital Investment Program[3][4] 1 -514,000 - 217,500 -564,000 -860,500Reprogramming of intelligence project 1 -6,285 - - - -6,285 Efficiency Dividend - adjustment 1 -1,776 -2,887 -3,870 - -8,533 Bring forward of 2007-08 reprogramming 1 307,000 - - - 307,000 Bring forward of 2007-08 reprogramming - operations[4] 2 - - - - -Reconciliation of 2007-08 operations expenditure 2 29,353 - - - 29,353Defence Home Ownership Assistance Scheme 1 1,770 2,310 3,100 3,980 11,160

Total other budget adjustments 172,803 1,128,431 1,408,447 433,295 3,142,976 Notes 1. Cross reference to serial 4 of Table 1.1.1. 2. Price and foreign exchange convert the other budget adjustments into 2008-09 MYEFO outturned prices. 3. The $514m reprogrammed from 2008-09 under the Approved Major Capital Investment Program includes $50m of cost

savings which will be harvested for use in 2014-15 ($56m outturned – refer Table 1.1.1). 4. The bring-forward of $155m for operations from 2012-13 ($166m outturned – refer Table 1.1.1), which was reprogrammed

as part of the 2007-08 underspend, has been returned to Government and has a zero impact on 2008-09.

UPDATE OF PRICE INDEXATION

The Defence budget is price updated at each budget milestone to reflect movements in the non–farm Gross Domestic Product (GDP) deflator. As a result, funding to Defence for price movements has been decreased by $18.2m in 2008-09, as part of an additional reduction of $746.1m over the forward estimate years.

FOREIGN EXCHANGE MOVEMENTS

Under the ‘no-win-no-loss’ arrangements, Defence is required to return to the Government any surplus foreign exchange supplementation for an appreciation of the Australian dollar relative to other currencies. Conversely, where the Australian dollar depreciates relative to other currencies, Defence is supplemented under these arrangements. Defence will receive $582.7m in 2008-09, having taken into account movements in exchange rates since the 2008-09 Budget. Over the current year and forward estimates a total of $4,453.3m will be provided.

REPROGRAMMING OF THE ENHANCED LAND FORCE (ELF) Following an analysis of the start-up rate for ELF, $207.8m has been reprogrammed from 2008-09 into later years. This was the result of it not being possible to invest in facilities development as quickly as originally planned.

21


REPROGRAMMING OF THE APPROVED MAJOR CAPITAL INVESTMENT PROGRAM

Following a comprehensive program review of 230 major projects, an amount of $514.0m has been reprogrammed from 2008-09. This is predominantly due to unanticipated contractor delays and revised estimates for Foreign Military Sales. Of this amount, $50m is cost savings which will be harvested for investment in 2014-15 ($56m outturned).

REPROGRAMMING OF AN INTELLIGENCE PROJECT

An amount of $6.3m will be reprogrammed beyond the forward estimates.

EFFICIENCY DIVIDEND - ADJUSTMENT

In order to ensure consistency in the methodology of calculating the efficiency dividend, an adjustment was needed to the amounts charged in the 2007-08 Additional Estimates for the increase in the rate of the dividend from one percent per annum to 1.25% for the three years from 2008-09 to 2010-11. The total effect of the adjustment over the three years is to increase the dividend, and hence savings to the Government, by $8.5m.

BRING FORWARD OF 2007-08 REPROGRAMMING

In the 2008-09 Budget, an amount of $679.7m was reprogrammed from 2007-08 to 2012-13 and beyond as a result of an anticipated underspend in 2007-08 by Defence and the Defence Materiel Organisation. An amount of $307.0m (2008-09 Budget outturned prices) will be brought forward from 2013-14 and 2014-15 back to 2008-09 to meet emerging pressures. In addition, an amount of $155m of the reprogramming for operations has been brought forward from 2012-13 ($166m outturned) and returned to Government.

RECONCILIATION OF ‘NO-WIN-NO-LOSS’ 2007-08 OPERATIONS EXPENDITURE

Operations funding is provided to Defence on a ‘no-win-no-loss’ basis and is subject to annual reconciliation by Defence and the Department of Finance and Deregulation. Following the reconciliation of 2007-08 expenditure, Defence will be supplemented $29.4m.

DEFENCE HOME OWNERSHIP ASSISTANCE SCHEME

The Defence Home Ownership Assistance Scheme Act 2008 does not cover the administration costs of this scheme which were included in the estimates of administered funds when the Scheme was announced as a measure in the 2007-08 Budget. This adjustment transfers the estimated administration costs of the scheme ($1.8m in 2008-09 and $11.2m over the forward estimates) from administered to departmental appropriations.

22

FUNDING FROM OTHER SOURCES

Table 1.2.1 provides details of the funding Defence will receive in 2008-09 in addition to funding from Government. This funding consists of net capital receipts and own source revenue. Further details of these funding sources are provided below.

Net capital receipts There have been no variations to Defence’s net capital receipts since the 2008-09 Budget.

Own source Revenue Serial 8 of Table 1.2.1 shows the resources retained by Defence in accordance with Regulation 15 of the Financial Management and Accountability Act 1997. Variations to Defence’s planned own source revenue since the 2008-09 Budget are shown in Table 1.2.6.

Table 1.2.6—Variation in Defence’s own source revenue 2008-09 2009-10 2010-11 2011-12 Budget Forward Forward Forward

estimate estimate estimate estimate $'000 $'000 $'000 $'000

Previous estimate as published in the Portfolio Budget Statements 2008-09[1] 811,892 832,956 844,554 874,014

Variation in own source revenue -705 -4,745 -4,765 -13,081 Own source revenue 811,187 828,211 839,789 860,933 Notes 1. As published in the Portfolio Budget Statements 2008-09 Table 1.2.1 serial 8.


23


FUNDING FOR OPERATIONS

The ADF is involved in a number of deployments around the world, including United Nations peacekeeping and regional assistance missions, and border protection and domestic security operations. Defence plans to spend $1,218.9m on the net additional costs of its operational deployments in 2008–09, or $170.1m more than the budget estimate. The revised estimates for all operations are shown in Table 1.2.7. Details of 2008–09 adjustments of $170.2m are as follows:

• operations in Iraq ($133.2m) • operations in Afghanistan ($42.1m) • operations in East Timor (-$5.1m) The major variations compared with the budget are detailed in Table 1.2.7 below.

Table 1.2.7—Revised cost estimates for operations 2007-08 2008-09 2008-09 2009-10 2010-11 2011-12

Actual Budget Revised Forward Forward Forward Operation Result Estimate Estimate Variation Estimate Estimate Estimate

$m $m $m $m $m $m $m Operation Astute 205.6 174.3 169.1 -5.1 18.7 -

Operation Slipper [1] [2] 394.9 618.9 661.0 42.1 130.8 2.9 Operation Resolute 7.0 12.8 12.8 - 13.0 13.3 Operation Catalyst [3] 501.5 215.7 348.9 133.2 51.7 -

Operation Anode 23.7 27.1 27.1 - - - Operation Deluge 4.0 - - - - - Operation Outreach 12.3 - - - - - Total Net Additional Costs 1,149.1 1,048.7 1,218.9 170.2 214.2 16.2

Notes 1. The 2008-09 Revised Estimate includes a carry forward from 2007-08 of $15.6m for rapid acquisition of force protection

equipment. 2. Government approved $76.2m for additional force protection equipment. 3. The 2008-09 Revised Estimate includes a carry forward from 2007-08 of $23.9m for rapid acquisition of force protection

equipment.

OPERATIONS IN EAST TIMOR (OPERATION ASTUTE) Operation Astute is the Australian Government’s response to a request from the Government of East Timor to assist in the restoration of stability, security and confidence to their country. The Government has approved a reduced ADF presence in East Timor by early 2009 to 650 personnel, expected to be a saving of $5.1m in 2008-09 for reduced personnel allowances and logistic support costs.

The revised estimate for 2008–09 is $169.1m which is $5.1m less than the 2008–09 Budget.

OPERATIONS IN AFGHANISTAN (OPERATION SLIPPER) Operation Slipper is the ADF’s contribution to the international coalition against terrorism. In 2008-09, Defence plans to spend $26.5m for additional force protection measures and has also carried forward funding of $15.6m from 2007-08 for outstanding rapid acquisitions. Further, Government has also approved $49.7m in 2009-10 for force protection measures.

The revised estimate for 2008–09 is $661.0m which is $42.1m more than the 2008–09 Budget.

OPERATIONS IN IRAQ (OPERATION CATALYST) Operation Catalyst is the ADF’s contribution to Multinational Force efforts to develop a secure and stable environment in Iraq and assist national recovery programs. The Government has extended the ADF deployment to June 2009 and has approved an additional $92.3m in 2008-09 to fund the continuation of the operation. The Government has also approved $17.2m in 2008-09 for a scoping

24


study and delivery of enhanced infrastructure and consolidation of resources. Additionally, $23.9m has been carried forward from 2007-08 for outstanding rapid acquisition of force protection measures and additional equipment purchases.

The revised estimate for 2008–09 is $348.9m which is $133.2m more than the 2008–09 Budget.

OTHER OPERATIONS

There are no changes since the 2008–09 Budget in respect of Operations Resolute, Anode, Deluge and Outreach.

HISTORICAL AND PLANNED EXPENDITURE ON OPERATIONS

Table 1.2.8 shows the historical and planned expenditure on operations since 1999-2000 when the ADF deployed to East Timor. The figures reflect actual expenditure over the period 1999-2000 to 2007-08 and current planned expenditure. Overall, Defence has spent or is planning to spend $8.7b on the net additional costs of operations for which the Government has provided supplementary funding of $7.6b.

25

Table 1.2.8—Net additional cost of operations from 1999-2000 to 2011-12

Operation

1999-00 Actual Result

$m


$m


$m


$m


$m


$m


$m


$m

2007-08 2008-09 Revised

Estimate

$m

Actual Result

$m

2009-10 Forward Estimate

$m


$m


$m

Total

$m

Operation Astute[1] 598.1 798.5 632.9 579.3 554.0 27.4 23.9 191.4 205.6 169.1 18.7 - 3,798.9

Operation Bel Isi

Operation Slipper[2]

Operation Resolute[3]

Operation Catalyst[4]

-

-

-

-

20.0

-

-

-

10.1

320.0

22.2

-

14.6

176.0

27.8

285.3

3.0

-5.0

15.9

240.6

-

-

11.9

284.9

-

91.0

9.8

351.4

-

223.3

9.3

398.5

394.9

7.0

501.5

-

661.0

12.8

348.9

-

130.8

13.0

51.7

-

2.9

13.3

-

-

47.7

1,994.9

143.0

2,462.8

Operation Anode - - - - 90.4 27.6 12.9 17.3 23.7 27.1 - - - 199.0

Operation Sumatra Assist - - - - - 37.0 7.5 - - - - - 44.5

Operation Acolyte - - - - - 0.1 10.4 - - - - - 10.5

Operation Deluge - - - - - - - 2.7 4.0 - - - - 6.7

Operation Pakistan Assist - - - - - - 9.8 - - - - - 9.8

Operation Outreach - - - - - - - - 12.3 - - - - 12.3

Total Net Additional Costs 598.1 818.5 985.2 1,083.0 898.9 388.9 516.7 842.5 1,149.1 1,218.9 214.2 16.2 - 8,730.0

Sources of Funding for Operations:

Government Supplementation 598.1 818.5 985.2 1,083.0 898.9 388.9 506.9 842.5 1,127.5 115.4[5] 164.4 16.2 7,545.4

Department of Foreign Affairs and Trade [6] - - - - - - 9.1 - - - - - 9.1

Department of Defence (Absorbed) - - - - - - 0.7 - 21.6[7] 1,103.4[8] 49.7 [9] - 1,175.4

Total Cost 598.1 818.5 985.2 1,083.0 898.9 388.9 516.7 842.5 1,149.1[10] 1,218.9[11] 214.2 16.2 - 8,730.0

Notes: 1. Includes force generation funding from 1999-00 to 2003-04, with an ongoing amount of $448.9m included in Defence's funding base from 2004-05. 2. The 2008-09 revised estimate includes a carry forward from 2007-08 of $15.6m and an additional $26.5m for rapid acquisition of force protection equipment. 3. Previously Operations Relex and Relex II. 4. The 2008-09 revised estimate includes a carry forward from 2007-08 of $23.9m for outstanding rapid acquisition of force protection equipment. 5. Includes funding for Operation Resolute extension ($12.8m), Operation Catalyst extension ($92.3m), enhanced infrastructure and consolidation of resources ($15.5m) and a reduction of

personnel in East Timor (-$5.1m). 6. Defence was reimbursed $9.1m for the net additional cost of Operation Pakistan Assist by the Department of Foreign Affairs and Trade through the existing aid budget. 7. Defence has been required to absorb a total of $21.6m for force protection measures. This includes $10.8m each for Operation Slipper and Operation Catalyst. 8. Defence funded $1035.9m from internal Defence efficiency measures ($209.4m), and increases in the non-farm GDP deflator that is used to adjust Defence funding for price increases ($826.5m).

Defence also funded $66.0m relating to carry forwards from 2007-08 ($39.5m), purchases of rapid acquisition equipment ($26.5m) and rebasing of ADF personnel ($1.7m). 9. Defence has been required to absorb $76.2m for Operation Slipper for additional rapid acquisition purchases, comprising $26.5m in 2008-09 and $49.7m in 2009-10 10. The variation between the 2007-08 revised estimate and the actual result is due to an underspend of $165.0m. 11. The variation between the 2008-09 PBS and revised estimate includes a reduction of personnel in East Timor (-$5.1m), a scoping study and delivery of enhanced infrastructure and consolidation

of resources ($17.1m), the extension of operations in Iraq ($92.3m), additional force protection measures ($26.5m) and the carry over of rapid acquisition purchases ($39.5m). The helicopter initiative ($3.0m) has not been included in the cost of operations as it is not part of a specific operation.

26

APPROPRIATIONS

Annual Appropriations Defence’s annual appropriations will increase by $278.6m to $22,036.4m (refer also to serials 1 through 4 in Table 1.2.1). This includes an increase of $839.2m for departmental outputs and a decrease of $560.6m for the equity injection. Defence will seek a determination by the Minister for Finance and Deregulation, under Section 9 of the Appropriation Act (No 2) 2008-09, to decrease the equity injection appropriation.

Table 1.2.9—Appropriation Bill (No 3) 2008-09 2007-08

available $'000

2008-09 Budget

$'000

2008-09 revised

$'000

Additional estimates

$'000

Reduced estimates

$'000 DEPARTMENTAL OUTPUTS Outcome 1 Australia's national interests are protected and advanced through the provision of military capabilities and the promotion of security and stability

Outcome 2 Military operations and other tasks directed by the Government to achieve the desired results

Outcome 3 Defence's support to the Australian community and civilian authorities to achieve the desired results

18,040,102

1,617,682

35,483

18,379,067

1,000,107

12,863

19,099,284

1,119,066

12,863

720,217 -

118,959 -

- -

Total 19,693,267 19,392,037 20,231,213 839,176

Table 1.2.10—Appropriation Bill (No 4) 2008-09 2007-08

available$'000

2008-09Budget

$'000

2008-09revised

$'000

Additional Estimates

$'000

Reduced estimates

$'000

PAYMENTS TO STATES, ACT, NT AND LOCAL GOVERNMENT 26,800 23,300 23,000 - -Total 26,800 23,300 23,000 - -

Non-operating

Equity injections 524,315 2,365,736 1,805,180 - - 560,556

Previous years' outputs [1] 64,174 - - - -

Total non-operating 588,489 2,365,736 1,805,180 - - 560,556

- 560,556 Total 615,289 2,389,036 1,828,480 -


Note 1. $64,174m was fully utilised in 2007-08 and is therefore not part of 2008-09 budget estimates.

27


PAYMENTS TO THE DEFENCE MATERIEL ORGANISATION

Table 1.2.11—Total Payment to the DMO in 2008-09 2008-09 2008-09 Budget Revised

estimate estimate Variation $m $m $m

Unapproved Major Capital Equipment Projects (Defence Capability Plan) 277.6 188.1 -89.5

Major Capital Equipment Projects 3,989.1 3,888.4 -100.7

Acquisition Service Fee 373.1 374.2 1.1

1 Sub total Major Capital Investment Projects 4,639.8 4,450.7 -189.1

Approved Navy minor projects 22.9 23.2 0.3

Approved Army minor projects 62.4 45.1 -17.4

Approved Air Force minor projects 31.9 20.8 -11.1

Approved Joint Logistics minor projects 5.3 8.3 3.0

Approved Chief Information Officer minor projects 1.4 1.5 0.1

Approved Intelligence, Security & International Policy minor projects 0.0 4.9 4.9

2 Sub total approved minor programs 124.0 103.8 -20.2

Unapproved Navy minor projects 1.9 2.1 0.2

Unapproved Army minor projects 0.0 18.4 18.4

Unapproved Air Force minor projects 7.9 16.2 8.3

Unapproved Joint Logistics minor projects 7.3 5.1 -2.2

Unapproved Chief Information Officer minor projects 0.0 0.0 0.0

3 Sub total unapproved minor programs 17.1 41.8 24.7

4 Sub total minor programs (2+3) 141.1 145.6 4.5

5 Total acquisition (DMO output 1) (1+4) 4,781.0 4,596.4 -184.6

Navy sustainment 1,346.8 1,371.3 24.5

Army sustainment 1,314.0 1,506.4 192.4

Air Force sustainment 1,255.2 1,340.7 85.5

Chief Information Officer sustainment 41.1 26.5 -14.6

Intelligence, Security and International Policy sustainment 49.4 49.1 -0.3

HQJOC Sustainment 2.8 2.8 0.0

VCDF sustainment 0.0 34.9 34.9

Defence Capability Plan (operating costs) 136.6 46.0 -90.6

Sub Total 4,145.9 4,377.7 232.0

Service fee 396.9 396.8 -0.1

6

7

Total sustainment (DMO output 2) 4,542.6 4,774.5 231.9

Total planned payments to DMO (5+6) 9,323.6[1] 9,370.9 47.3 Notes 1. This figure does not match the DMO resource table on p129 of Part 2, because it has been adjusted to take into account a

reprogramming activity which should have been included in the 2008-09 Budget Estimates.

Further details in relation to the DMO can be found in Section Two.

28


PAYMENTS TO DEFENCE HOUSING AUSTRALIA

Control Arrangements There have been the following changes to the DHA Board members since the publication of the Portfolio Budgets Statements 2008-09:

Chairman Mr D Volker AO Commercial Director The Hon JAL (Sandy) Macdonald[1]

Note 1. The Hon. JAL (Sandy) Macdonald replaced Ms SA Chaplain as one of the Commercial Directors.

There have been the following changes to the Advisory Committee members since the publication of the Portfolio Budgets Statements 2008-09:

DCN Rear Admiral DR Thomas AM DCAF Air Vice Marshal G Brown

Resourcing DHA provides housing and relocation services for ADF members. The revised estimate for 2008-09 for the purchase of these services from DHA is $542.2m, compared with the estimate of $443.6m in the Portfolio Budget Statements 2008-09, an increase of around $98.6m. The variations in the cost of the provision of these services are due to increases in the cost of housing and relocation services, mainly associated with market rental increases.

29

CHAPTER THREE – DEFENCE REFORM

This chapter remains as was reported in the Portfolio Budget Statements 2008-09.

CHAPTER FOUR — CAPITAL INVESTMENT PROGRAM

OVERVIEW

DEFENCE CAPABILITY PLAN

THE APPROVED MAJOR CAPITAL INVESTMENT PROGRAM

CAPITAL FACILITIES PROJECTS

OTHER INVESTMENTS

CAPITAL RECEIPTS

Chapter Four – Capital Investment Program

OVERVIEW

The Capital Investment Program is comprised of the Defence Capability Plan, the Approved Major Capital Equipment Program, the Capital Facilities Program, Other Capital Purchases, and Capital Receipts.

The Capital Investment Program for 2008-09, including capital receipts, has decreased by $295.5m to $6,060.2m since the 2008-09 Budget. Table 1.4.1 shows the revised investment program by both its capital and operating elements and an explanation of the variations in each element of the Capital Investment Program follows.

Table 1.4.1—Variation in the Capital Investment Program 2008-09

Group/Item Description

2008-09 Budget

Estimate $m

2008-09 Revised

Estimate $m

Variation $m

1 Defence Capability Plan 405.7 188.2 -217.5

2 Approved Major Capital Investment Program 4,419.9 4,321.2 -98.7

3 Major Capital Investment Program (1+2) 4,825.6 4,509.4 -316.2

4 Capital Facilities 838.3 758.3 -80.0

5 Other Investment 757.4 858.2 100.8

6

Total Capital Investment Program (3+4+5)

- Capital Component[1]

6,421.4

5,950.5

6,125.9

5,646.5

-295.5

-304.0

- Operating Component 470.8 479.3 8.6

7 Net Capital Receipts[2]

Net Capital Investment Program [3] (6+7)

-65.7

6,355.7

-65.7

6,060.2

0.0

-295.5 Notes: 1. Cross reference with Budgeted Financial Statements Table 1.7.11 2. Cross reference with Table 1.4.6 3. Capital Investment Program incorporates the effect of reprogramming the Enhanced Land Force and Approved Major

Capital Investment Program as outlined in Chapter Two – Resourcing. Table 1.2.5.

35

Chapter Four– Capital Investment Program

DEFENCE CAPABILITY PLAN

Since the previous White Paper was released in 2000, more than 197 major projects or phases of projects have been approved with an approximate cost of $47.1b. Further projects will be considered for approval in 2008-09.

The reduction in the Defence Capability Plan of $217.5m does not represent a real decrease in funding for major capital, but rather the progressive transfer of funding for newly approved projects to the DMO and Defence Groups ($222.0m) offset by exchange and other variations of $4.5m. An amount of $86.3m has been transferred to the DMO and a further $45.5m to Defence groups so that further development work and acquisition action can proceed. As part of the Additional Estimates, an amount of $90.2m has been reprogrammed out of 2008-09 to meet programming requirements for the Enhanced Land Force.

Major projects recently approved by the Government Major projects approved since the 2008-09 Budget include:

SECOND PASS APPROVAL

• Capability Assurance Program 1 (AIR 5276 CAP 1)

• C-130J Block Upgrade Project (AIR 5440 Phase 1) - one year of Global Program Arrangements

• Tactical Information Exchange Domain - Data Links (JP 2089 Phase 2A)

• LAND 106 Enhanced Land Force Additional Upgraded M113 Armoured Personnel Carriers.

FIRST PASS APPROVAL

• Overlander Field Vehicles and Trailers (LAND 121 Phase 4)

• Seahawk Capability Assurance Program 1 (AIR 9000 SCAP 1).

THE APPROVED MAJOR CAPITAL INVESTMENT PROGRAM

The Approved Major Capital Investment Program has decreased overall by $98.7m since the 2008-09 Budget to $4,321.2m. This includes a decrease in the DMO element of the program of $99.6m, for the following reasons:

• Reprogramming of $514.0m to future years to meet the expected funding requirements

• A net foreign exchange adjustment of $396.8m

• Transfers between the investment and sustainment budgets of $34.5m

• Transfers of funding to the Approved Major Capital Investment Program for new projects of $52.1m.

An overview of the Top 30 projects in the Approved Major Capital Investment Program can be found in Section Two – Defence Materiel Organisation.

The element of the program not managed by DMO has increased by $0.9m. This is due to funding transferred from the Defence Capability Plan to Defence groups.

36


CAPITAL FACILITIES PROJECTS

The capital facilities program comprises approved and unapproved major and medium projects.

The Major Capital Facilities Program has decreased by $80m to $758m since the 2008-09 Budget. This is due largely to reprogramming the Enhanced Land Force Stage 1 capital facilities project. There are a number of other outstanding budget transfers which will result in a rise in the projected budget outcome against this program once completed.

Approved major capital facilities projects Major capital facilities projects have expenditure over $15m and are subject to Government approval and review by the Joint Statutory Committee on Public Works (PWC). Medium facilities projects have expenditure between $250,000 and $15m. Projects between $5m and $15m are subject to Government approval, but are not reviewed by the PWC. Projects under $5m are approved by departmental delegates. Details of these projects are provided in this section.

Table 1.4.2 and the following descriptions provide details on progress and expenditure since the 2008-09 Budget on major capital facilities projects.

37


Table 1.4.2—Approved major capital facilities projects by state and federal electorate Total

Estimated Expenditure

$m

Cumulative Expenditure to

30 June 2008 $m

2008-09 Budget

Estimate $m

2008-09 Additional

Estimate $m

Variation$m

NEW SOUTH WALES Eden-Monaro

Headquarters Joint Operations Command

Command, Control, Communications, Computing and Intelligence Systems 99.7[1] 43.1 42.1 56.6 14.5

Gilmore

HMAS Albatross Multi Role Helicopter Facilities [2] [3] 137.2 - - 5.1 5.1

Hughes

Holsworthy Special Operations Working Accommodation and Base Redevelopment Stage 1 207.7 171.1 13.0 14.6 1.6

171 Aviation Squadron Relocation 92.0 70.1 17.0 13.2 -3.8

Newcastle

Williamtown RAAF Williamtown Redevelopment Stage 1 and Airborne Early Warning and Control Works and Multi Role Tanker Transport Pavement Works 132.7 [4] 117.0 15.4 12.0 -3.4

Total New South Wales 669.3 401.3 87.5 101.5 14.0 VICTORIA Indi Bandiana

Joint Logistics Unit Victoria – Warehousing [5] 36.4 - - 3.0 3.0

Jagajaga

Watsonia Defence Force School of Signals 101.3 2.6 60.0 25.0 -35.0

McEwen

Monegeetta Land Engineering Agency Test Services Relocation 35.9 - 20.0 10.0 -10.0

Total Victoria 173.6 2.6 80.0 38.0 -42.0 QUEENSLAND Blair

Amberley RAAF Amberley Redevelopment Stage 3 331.5 12.5 130.0 150.0 20.0 Heavy Airlift Capability – Permanent Facilities [6] 268.2 11.3 80.0 80.0 -Australian Super Hornet Facilities [7] 111.7 - - 16.0 16.0

Brisbane

Enoggera

Base Redevelopment Stage 1 80.2 - - 25.5 25.5

Multi Role Helicopter Facilities [2] [3] - - - 7.0 7.0

Groom

Oakey


Leichhardt

38

Y

Cairns HMAS Cairns Redevelopment 76.3 52.1 18.0 18.0 -

Herbert

Townsville Lavarack Barracks Redevelopment Stage 4 207.2 42.3 69.0 69.0 -Heavy Airlift Capability – Permanent Facilities [6] - - 10.0 14.0 4.0


Total Queensland 1,075.1 118.2 307.0 395.4 88.4 SOUTH AUSTRALIA

Wakefield Edinburgh Defence Precinct

Hardened and Networked Army Facilities 597.4 [8] - - 85.0 85.0

RAAF Edinburgh Heavy Airlift Capability – Permanent Facilities [6] - 1.7 20.0 20.0 -

Total South Australia 597.4 1.7 20.0 105.0 85.0 WESTERN AUSTRALIA

Pearce RAAF Pearce – Redevelopment Stage 1 142.2 0.7 34.0 36.8 2.8 Heavy Airlift Capability – Permanent Facilities [6] - - 0.2 0.2 -

Total Western Australia 142.2 0.7 34.2 37.0 2.8 NORTHERN TERRITORY Lingiari RAAF Tindal

Redevelopment Stage 5 58.7 - - 2.0 2.0

Airborne Early Warning and Control Aircraft Facilities 64.2 - - 4.8 4.8

Timber Creek Bradshaw Field Training Area Infrastructure 72.6 64.8 7.6 6.5 -1.1

Solomon

Darwin Darwin Naval Base – Patrol Boat Facilities 19.2 13.2 1.4 2.0 0.6 Robertson Barracks Redevelopment 72.1 - - 9.7 9.7

RAAF Darwin Redevelopment Stage 2 49.8 - - 1.8 1.8 Heavy Airlift Capability – Permanent Facilities [6] - 1.6 20.0 16.0 -4.0

Total Northern Territory 336.6 79.6 29.0 42.8 13.8 AUSTRALIAN CAPITAL TERRITORFraser

HMAS Creswell Redevelopment 83.6 - 9.7 6.0 -3.7

Total Australian Capital Territory 83.6 - 9.7 6.0 -3.7


39

OTHER Malaysia Royal Malaysian Air Force – Butterworth

Australian Defence Force Facilities Rationalisation 23.6 0.5 14.0 11.5 -2.5

Total Other 23.6 0.5 14.0 11.5 -2.5

Programming Adjustments - - -28.9 -161.8 -132.9 TOTAL 3,101.4 604.6 552.5 575.4 22.9


Notes 1. Increase in approved budget is related to price supplementation, out-turning, land acquisition, relocation and project

management. 2. Multi Role Helicopter Facilities – Permanent Facilities has an approved budget of $168.7m covering four locations: HMAS

Albatross (Nowra); RAAF Townsville; the Army Aviation Centre (Oakey); and Gallipoli Barracks, Enoggera (Brisbane). 3. Multi Role Helicopter Facilities – Permanent Facilities budget excludes $31.5m for simulation facilities being delivery by the

DMO and is reported by the DMO. 4. The budget figure is the approved project budgets for the RAAF Williamtown Redevelopment Stage 1 and Airborne Early

Warning and Control Works projects and the addition of the Multi Role Tanker Transport Pavement Works project. Budget amended subsequent to publication of Portfolio Budget Statements 2008-09.

5. Project approved after publication of the Portfolio Budget Statements 2008-09. 6. RAAF Amberley Heavy Airlift Capability – Permanent Facilities has an approved budget of $268.2m covering five locations,

RAAF Amberley, RAAF Edinburgh, RAAF Darwin, RAAF Townsville and RAAF Pearce. 7. The $117.1m budget for Australian Super Hornet facilities includes both the development and delivery phase budgets. The

delivery phase budget of $111.7m may need to be adjusted to reflect the final expenditure from the development phase. 8. The $623.7m budget for Hardened and Networked Army facilities includes the development and delivery phase budgets.

The delivery phase budget of $597.4m has been updated to reflect the final expenditure from the development phase.

The descriptions of the major capital facilities projects remain as reported for approved projects in the Portfolio Budget Statements 2008-09 except for the following information:

New South Wales

Multi Role Helicopter Facilities The project received parliamentary clearance in June 2008. Construction is expected to commence in late 2008 with completion expected in 2010.

Holsworthy—Special Operations Working Accommodation and Base Redevelopment Stage 1 The expenditure forecast in the Portfolio Budget Statements 2008-09 has been revised to reflect the 2007-08 outcome and the current construction program. Completion of the project is currently scheduled for 2009.

Williamtown—RAAF Williamtown Redevelopment Stage 1 and Airborne Early Warning and Control Works and Multi Role Tanker Transport Pavement Works This project has provided a major upgrade to the base infrastructure. The remaining project element, construction of an Ordnance Loading Complex, has commenced. Expenditure has been revised to reflect the current construction program. Completion is anticipated in 2009.

Victoria

Bandiana—Joint Logistics Unit Victoria Warehousing The project received parliamentary clearance in September 2008. Construction is expected to commence in late 2008 and be completed in 2010.

Watsonia—Defence Force School of Signals Construction commenced in October 2008 after delays were experienced in tendering the works. Completion is now scheduled for 2011.

40


Monegeetta—Land Engineering Agency Test Services Relocation Construction is expected to commence by early 2009 after delays were experienced in tendering the works. Completion remains scheduled for 2010.

Queensland

Amberley—RAAF Amberley Redevelopment Stage 3 Construction started in 2008 and is on schedule. Expenditure has been revised to reflect the updated project schedule. Key facilities are planned to be completed progressively from 2010 through to late 2011.

RAAF Amberley—Australian Super Hornet Facilities This project will provide new, expanded and modified facilities and infrastructure at RAAF Amberley to support the introduction of the Super Hornet aircraft. Parliamentary clearance was received in October 2008. Construction is expected to commence by early 2009 and be completed in late 2010.

Enoggera—Base Redevelopment Stage 1 The project received parliamentary clearance in June 2008. Site facilities were established in August 2008 and procurement of subcontractors is progressing. Construction is expected to be completed in 2010.

South Australia

Edinburgh Defence Precinct—Hardened and Networked Army Facilities The project received parliamentary clearance in June 2008. Construction is expected to commence in late 2008.

Northern Territory

Katherine—RAAF Tindal Redevelopment Stage 5 The project received parliamentary clearance in June 2008. Construction is expected to commence in 2009, with completion expected in 2011.

Katherine—RAAF Tindal Airborne Early Warning and Control Facilities The project received parliamentary clearance in June 2008. Construction is expected to commence in 2009, with completion expected in 2011.

Timber Creek—Bradshaw Field Training Area Infrastructure The residual works remain scheduled for completion by late 2008. Expenditure has been revised to reflect the current construction program.

Darwin—Darwin Naval Base Patrol Boat Facilities Expenditure has been revised to reflect delays experienced in obtaining satisfactory tenders for the remaining works. These remaining minor works are now scheduled for completion in 2009.

Darwin—Robertson Barracks Redevelopment Parliamentary clearance was obtained in June 2008. Construction is expected to commence in 2009, with completion expected in 2011.

Darwin—RAAF Darwin Redevelopment Stage 2 The project received parliamentary clearance in June 2008. Construction is expected to commence in 2009, with completion expected in 2011.

41


Australian Capital Territory

HMAS Creswell Redevelopment Expenditure has been revised downwards to reflect the extended design and procurement phase of the project. The project is expected to be complete in 2010.

Malaysia

RMAF Butterworth—Australian Defence Force Facilities Rationalisation Expenditure forecast in the Portfolio Budget Statements 2008-09 has been revised to reflect the updated construction program. Construction commenced in 2008 and is planned to be completed in 2010.

Status of Major Projects foreshadowed for Government and/or Parliamentary Joint Statutory Committee on Public Works Consideration in 2008-09 During 2008-09, Defence expects to present a number of facilities proposals to the Government and the PWC. Table 1.4.3 provides details of the proposed major capital projects expected to be referred to the PWC in 2008-09. In some cases, the projects may require the Government’s approval before referral to the committee.

42


Table 1.4.3—Program of Major Works (by state, federal electorate and locality)

Actual/Indicative Referral Date Hearing Date [1]

VICTORIA Indi Bandiana: Joint Logistics Unit Victoria – Warehousing Expediency motion

4 September 2008 McEwen Puckapunyal Redevelopment 6 November 2008 In development

QUEENSLAND Blair Amberley: RAAF Amberley – Australian Super Hornet Facilities

20 August 2008 Expediency motion23 October 2008

Brisbane Enoggera: Base Redevelopment Stage 1 Expediency motion

25 June 2008 RAAF Townsville

Additional Chinook Helicopter Facilities November 2009 February 2010 In development

SOUTH AUSTRALIA Wakefield Edinburgh Defence Precinct: Hardened and Networked Army Facilities

Expediency motion25 June 2008

Edinburgh: RAAF Edinburgh Redevelopment Stage 2 February 2009 April 2009 In development

NORTHERN TERRITORY Solomon Darwin: RAAF Darwin Redevelopment Stage 2 Expediency motion

25 June 2008 Darwin: Robertson Barracks Redevelopment (includes Land 907 and Hardened and Networked Army projects)


Lingiari Katherine: RAAF Tindal Redevelopment Stage 5


Katherine: RAAF Tindal Airborne Early Warning and Control Facilities


VARIOUS LOCATIONS Multi Role Helicopter Facilities Expediency motion

25 June 2008 Enhanced Land Force – Facilities Stage 1 November 2008 January 2009 In development

Actual/Indicative Current Status

January 2009 In development Note 1. Hearing dates will be subject to the Committee’s consideration and agreement.

The descriptions for the proposed major capital facilities remain as reported in the Portfolio Budget Statements 2008-09.

Approved projects under private financing arrangements

The descriptions for the approved projects under private financing arrangements remain as reported in the Portfolio Budget Statements 2008-09 except for the following information:

Eden-Monaro—Headquarters Joint Operations Command The building infrastructure for the Headquarters Joint Operations Command Project was handed over to Defence by the contractors, Praeco Pty Ltd, on 9 July 2008, when the financial lease and service payments began. There is $36.8m (including GST) budgeted for these payments in 2008-09.

43


Single Living Environment and Accommodation Precinct (Single LEAP)

Holsworthy – Single LEAP Construction of 600 Living-In Accommodation (LIA) units at Holsworthy Barracks is substantially completed. Construction commenced in February 2007 with the operational phase expected to commence in mid November 2008.

Enoggera – Single LEAP Construction of 500 LIA units at Gallipoli Barracks is well advanced. Construction began in May 2007 with the 30 year operational phase expected to commence two months ahead of schedule in early 2009.

RAAF Amberley – Single LEAP Construction of 295 LIA units at Amberley is complete. Construction began in April 2007 with the 30 year operational phase beginning on 16 June 2008.

Approved projects being developed for private financing arrangements

Project Single Living Environment and Accommodation Precinct (Single LEAP) Phase 2 Project Single LEAP Phase 2 represents an extension to the Phase 1 requirements for permanent Living-in-Accommodation to meet Defence’s previously identified priorities. Project Single LEAP Phase 2 will provide 3,535 contemporary units and associated facilities and services at a further 17 ADF bases across Australia as identified in Table 1.4.9 (page 54) in the Portfolio Budget Statements 2008-09.

Following review by the PWC, Phase 2 was approved by Parliament in June 2007. The two-stage tendering process for Phase 2 commenced with an Expression of Interest stage beginning in October 2006 that resulted in the short listing of four consortia consisting of: Living In Partnerships; Pinnacle Housing (LEAP2); Plenary Living; and Ubique Infrastructure Services. The tender evaluation process has been finalised and an announcement of the preferred proponent is anticipated in late 2008.

Other major capital facilities projects foreshadowed for 2008-09

Defence Site Platypus Contamination Remediation The Sydney Harbour Federation Trust is planning for the future use of the site and will undertake the necessary contamination remediation, in accordance with the requirements of the NSW Environment Protection Authority.

Approved medium capital facilities projects

Table 1.4.4 shows spending in 2008-09 for medium facilities projects.

44


Table 1.4.4—Approved medium capital facilities by state and federal electorate

45

Total Cumulative 2008-09 2008-09 estimated

expenditure $’000

expenditure to 30 June 2008

$’000

Budget estimate

$’000

Revised estimate

$’000 Variation

$’000 NEW SOUTH WALES Kingsford Smith Randwick

Disposal and Rationalisation – Interim Works 15,650[1] 5,980 2,640 7,760 5,120

Lindsay Defence Establishment: Orchard Hills

Follow-on Stand-off Weapon Facilities[2] 6,125 33 2,783 2,750 -33Office Accommodation and Entry Redevelopment [3] 2,020 - - 1,800 1,800

Total New South Wales 23,795 6,013 5,423 12,310 6,887 VICTORIA

Flinders HMAS Cerberus

West Head Gunnery Range 13,395 115 12,000 7,500 -4,500

Indi Bandiana

Army Logistics Training Corp – Supply Training Wing Upgrade [3] 9,157 - - 3,000 3,000

Melbourne Ports

Defence Science and Technology Organisation

Environmental Test Chamber 3,500 63 3,000 1,000 -2,000

Total Victoria 26,052 178 15,000 11,500 -3,500 QUEENSLAND

Blair Amberley

RAAF Amberley Contaminated Land Remediation 4,750[1] 3,780 1,100 170 -930

Brisbane Enoggera

8/9th Battalion Interim Working Accommodation [3] 2,700 - - 2,700 2,7009th Battalion Interim Working Accommodation [3] 4,323 - - 4,323 4,323

Capricornia Rockhampton

Western Street Depot Redevelopment 11,700 1,596 7,000 9,870 2,870

Groom Oakey

Weapons Training Simulator System 2,000[1] 980 700 730 30

Herbert Mount Stuart Training Area

Explosive Ordnance Roads Upgrade [3] 1,159 - - 1,000 1,000

Townsville Field Training Area

Urban Operations Training Facility [3] 4,462 - - 4,260 4,260

Total estimated

expenditure $’000

Cumulative expenditure to

30 June 2008 $’000

2008-09 Budget

estimate $’000

2008-09 Revised estimate

$’000 Variation

$’000 Lavarack Barracks

Joint Theatre Distribution Systems Facilities [3][4] 13,300 - - 3,400 3,400 Combat Training Centre - Interim Working Accommodation [3] 4,000 - - 4,000 4,000

Kennedy

Macrossan Depot Joint Theatre Distribution Systems Facilities [3][4] - - - 3,300 3,300

Total Queensland 48,394 6,356 8,800 33,753 24,953 SOUTH AUSTRALIA

Boothby Warradale Barracks

Weapons Training Simulator [3] System 2,100 5 - 1,995 1,995

Wakefield

Port Wakefield Explosives Storehouse Replacement 13,250[1] 18 10,000

Defence Science and Technology Organisation: Edinburgh

Countermine Facility Refurbishment 2,550 24 2,400 2,000 -400Weapons Systems Division Refurbishment 1,350 13 1,200 1,100 -100Combat Missions Systems Research Centre Extension 1,950 10 1,800 1,700 -100Over The Horizon Radar System Program Office Additional Working Accommodation 4,000 66 3,850 3,500 -350

Total South Australia 25,200 136 19,250 18,295 -955 WESTERN AUSTRALIA

Brand ANZAC System Program Office - Office Refurbishment 3,420 76 3,220 3,144 -76

Garden Island

Navy Personnel and Training Centre (West) and School of

Survivability and Ship Safety (West) 4,470 167 3,850 2,000 -1,850

Fremantle

Irwin Barracks

Relocation of the Western Australia University Regiment [3] 807 - - 800 800

Pearce Bindoon Training Range: Access

Control Facility 2,730 - 2,255 400 -1,855

Total Western Australia 11,427 243 9,325 6,344 -2,981 NORTHERN TERRITORY Lingiari

RAAF Tindal Follow-on Stand-off Weapon Facilities [2] - - 2,614 2,950 336

Solomon

Darwin Naval Fuel Installation Rectification 6,360 - 6,060 2,340 -3,720


46

8,000 -2,000

Total Cumulative 2008-09 2008-09 estimated expenditure to Budget Revised

expenditure 30 June 2008 estimate estimate Variation $’000 $’000 $’000 $’000 $’000

RAAF Darwin

Special Operations Forward Mounting Facility 5,585 408 5,070 5,070 -

Total Northern Territory 11,945 408 13,744 10,360 -3,384 TOTAL 146,813 13,334 71,542 92,562 21,020


Notes 1. Budget increase approved after publication of the Portfolio Budget Statements 2008-09. 2. Follow-on Stand-off Weapon Facilities has an approved budget of $6.125m covering two locations: Defence Establishment

Orchard Hills; and RAAF Tindal. 3. Project approved after publication of the Portfolio Budget Statements 2008-09. 4. Joint Theatre Distribution Systems Facilities has an approved budget of $13.3m covering two locations, Lavarack Barracks

and Macrossan Depot.

Proposed medium capital projects for consideration in 2008-09 Table 1.4.5 lists new medium capital facilities projects foreshadowed for conside ration in 2008-09.

47


Table 1.4.5—Proposed medium capital projects for consideration in 2008-09.

48

Federal Electorate Locality Status

NEW SOUTH WALES Lindsay Orchard Hills: Office Accommodation and Entry Redevelopment

Orchard Hills: Modification of Standard Missile Test Facility Hughes Liverpool Military Area: High Voltage Reticulation System Upgrade Hunter Singleton: School of Infantry: Urban Operations Training Facility Wentworth HMAS Watson: Bridge Simulator

Approved In development In development In development In development

VICTORIA Indi McEwen Gippsland

Bandiana: Supply Wing Army Logistics Training Centre Upgrade Land Engineering Agency: Proving Ground Perimeter Security

RAAF East Sale: School of Air Traffic – Tower Visual Simulator Facility Extension

Approved In development In development

QUEENSLAND Capricornia

Flynn

Groom Herbert

Shoalwater Bay Training Area: Camp Growl Stage 2 Field Firing Target System

3 Phase Power Supply Over the Horizon Radar: 3 Phase Power Supply

Oakey Fuel Farm upgrade Lavarack Barracks: Stockpile Remediation

Mount Stuart Training Area: Explosive Ordnance Depot Townsville Field Training Area: Urban Operations Training Facility

In development In development In development Cancelled by Sponsor In development Withdrawn: incorporated into major capital facilities project Approved Approved

SOUTH AUSTRALIA Boothby

Wakefield Warradale Barracks: Weapons Training Simulation System Facility

Port Wakefield: Battery Firing Facility Port Wakefield: Vibration Test Facility

Edinburgh Defence Precinct: Minor Units Facilities Woomera Prohibited Area: Disposal Explosive Ordnance Storage Facilities

Approved In development In development In development In development

WESTERN AUSTRALIA Curtin Swanbourne: Campbell Barracks: Helicopter Underwater Escape Training

Facility Swanbourne: Campbell Barracks: Project REDFIN Facilities Stage 1A

In development

In development

TASMANIA Bass Franklin

Scottsdale: Specific Nutritional Capability Fort Direction: Explosive Ordnance Upgrade

In development In development

NORTHERN TERRITORY Solomon Darwin: Shoal Bay Receiving Station Facilities Upgrade

Timber Creek: Bradshaw Field Training Area – Instrumented Air Weapons Range Robertson Barracks: 1 Aviation Regiment Facilities Upgrade Robertson Barracks: Barracks Power Supply Upgrade



AUSTRALIAN CAPITAL TERRITORY Fraser 1 Joint Public Affairs Unit Facility

Data Centre Infrastructure Upgrade Majura Field Training Area: Camp Blake Kitchen Upgrade

In development In development In development

VARIOUS LOCATIONS

Countermine Capability Facilities (Land 144) Special Operations: National Storage Facilities Joint Theatre Distribution Systems Facilities

In development In development Approved


OTHER INVESTMENTS

Other capital purchases have increased by $100.8m to $858.2m since the budget. This is primarily due to increased Repairable Items purchases in support of operations.

CAPITAL RECEIPTS

The Capital Receipts program comprises proceeds from property sales which are returned to the Government in the form of equity and proceeds from the sale of specialist military equipment, commercial vehicles and other plant and equipment items retained by Defence, under the Regulation 5 of the Financial Management and Accountability Act 1997. Details are shown in Table 1.4.6.

Table 1.4.6—Variation in Capital Receipts 2008-09 since the Budget Budget

Estimate Revised

Estimate Variation 2008-09 2008-09

$m $m $m Net Capital Receipts [1] [2] -65.7 -65.7 0.0

Notes 1. There were no variations in estimates since the 2008-09 budget. 2. Cross reference with serial 7 of table 1.4.1 and serial 7 of table 1.2.1.

49

CHAPTER FIVE —PEOPLE

WORKFORCE OVERVIEW

WORKFORCE SUMMARY

Chapter Five – People

WORKFORCE OVERVIEW

Defence’s workforce priorities remain as reported in the Portfolio Budget Statements 2008-09.

WORKFORCE SUMMARY

The revised strength of the Defence workforce (excluding the DMO civilian workforce, which is shown separately in Part 2 – Defence Materiel Organisation) is shown in Table 1.5.1 below. The revised strength of the total workforce in 2008-09 is forecast to be 63 more than the 2008-09 Budget Estimate of 90,581, including ADF employees (+1), civilian APS staff (+61) and Professional Service Providers (+1).

Table 1.5.1—Planned workforce allocation for the 2008-09 revised and forward estimates 2008-09 Budget

Estimate

2008-09 Revised

Estimate Variation



2011-12 Forward

Estimates

ADF Permanent Force

Navy 13,230 13,231 1 13,671 13,753

13,745

Army 27,461 27,463 2 28,350 28,904 29,649

Air Force 14,056 14,054 -2 14,168 14,220 14,113

1 Total Permanent Force 54,747 54,748 1 56,189 56,877 57,507

Active Reserve Force

Navy 2,000 2,000 - 2,050 2,050

2,100

Army 14,600 14,600 - 14,600 14,600 14,600

Air Force 1,700 2,000 300 2,100 2,200 2,300

2 Sub-total Active Reserve Force 18,300 18,600 300 18,750 18,850 19,000

High Readiness Reserve

Navy - - - - - -

Army 715 715 - 1,080 1,360 1,560

Air Force 900 600 -300 600 600 600

3 Sub-total High Readiness Reserve 1,615 1,315 -300 1,680 1,960 2,160

4 Total Reserves (2+3) 19,915 19,915 - 20,430 20,810 21,160

5 Total ADF Employees (1+4) 74,662 74,663 1 76,619 77,687 78,667

6 7 Professional Service Providers [1]

Australian Public Service 14,754

1,165

14,815

1,166

61

1

14,827

1,166

14,845

1,165

14,832

1,165

8 Total Civilian Employees (6+7)

9 Total Workforce Strength (5+8)

15,919

90,581

15,981

90,644

62

63

15,993

92,612

16,010

93,697

15,997

94,664 Note 1. PSPs are individuals under contract filling APS line positions.

53

Chapter Five - People

Over the next three years, the total workforce is funded to grow by 4,020 from the revised estimate of 90,644 in 2008-09 to 94,664 in 2011-12.

Table 1.5.2—Breakdown of personnel numbers by service and rank 2008-09 Budget

Estimate 2008-09

Revised Estimate [1] Navy

1 Star and above 48 48

Senior Officers [2] 476 476

Officers 2,822 2,822

Other Ranks 9,784 9,785

Gap Year Participants [3] 100 100

Sub total: Permanent Navy

Reserve Forces [4]

13,230

2,000

13,231

2,000

Total Navy 15,230 15,231 [1] Army






Sub-total: Permanent Army

Reserve Forces [4]

27,461

15,315

27,463

15,315

Total Army 42,776 42,778

Air Force [1]






Sub-total: Permanent Air Force 14,056 14,054

Reserve Forces [4] 2,600 2,600

Total Air Force 16,656 16,654 [1] APS

Senior Executives [5] 122 124

Senior Officers [2] 3,874 3,941

Other APS Staff 10,758 10,750

Sub-total APS 14,754 14,815

Professional Service Providers [6] 1,165 1,166

Total Workforce 90,581 90,644 Notes 1. Permanent Forces and APS numbers are forecasts of the average strength for 2008-09. Numbers for the APS and PSPs

excludes the DMO. 2. Senior Officers are of Colonel or Lieutenant Colonel rank equivalent and substantive Australian Public Service Executive

Level 1 and 2. 3. ADF Recruitment and Retention Initiative 4. Reserve figures represent the actual numbers of Active and High Readiness Reservists who render service. Reservists on

full-time service are reported in the Permanent Force. 5. The figures for Senior Executive Service include the Secretary of the Department of Defence. 6. Professional Service Providers are individuals under contract filling APS line positions.

54

Chapter Five – People

Employee expenses The revised estimate for employee expenses in 2008–09 is $8,127.3m, representing an increase of $186.0m from the 2008–09 budget estimate of $7,941.3m. Details are shown in Table 1.5.3

Table 1.5.3—Revisions to employee expenses Budget

Estimate 2008-09

$m

Revised Estimate 2008-09

$m Variation

$m

Forward Estimate 2009-10

$m


$m


$m Military Employee

Permanent Salary, Allowances, Superannuation and Leave Housing Health Services

5,353.8 481.3 245.8

5,545.3 481.3 246.4

191.5 -

0.6

6,028.7 497.7 263.8

6,329.7 513.7 288.3

6,512.1 536.7 302.2

Fringe Benefits Tax Reserves Salary and Allowances

300.0 192.2

298.9 192.2

-1.1 -

314.5 197.7

347.0 200.4

358.1 202.6

Sub-total Military Employee Expenses 6,573.1 6,764.1 191.0 7,302.4 7,679.1 7,911.7 Civilian Employee

Salary, Allowances, Superannuation and Leave Other Expenses including Fringe Benefits Tax

1,361.8

6.4

1,356.8

6.4

-5.0

-

1,303.6

6.7

1,418.9

7.3

1,402.8

7.6

Sub-total Civilian Employee Expenses 1,368.2 1,363.2 -5.0 1,310.3 1,426.2 1,410.4 Total Employees 7,941.3 8,127.3 186.0 8,612.7 9,105.3 9,322.1

55

SECTION TWO

OUTCOMES AND PLANNED PERFORMANCE

CHAPTER SIX —PLANNED OUTCOME PERFORMANCE

OUTCOMES AND PERFORMANCE INFORMATION

OUTPUT DESCRIPTIONS

OUTCOME ONE – AUSTRALIA’S NATIONAL INTERESTS ARE PROTECTED AND ADVANCED THROUGH THE PROVISION OF MILITARY CAPABILITIES AND THE PROMOTION OF SECURITY AND STABILITY

OUTCOME TWO – MILITARY OPERATIONS AND OTHER TASKS DIRECTED BY THE GOVERNMENT TO ACHIEVE THE DESIRED RESULTS

OUTCOME THREE – DEFENCE’S SUPPORT TO THE AUSTRALIAN COMMUNITY AND CIVILIAN AUTHORITIES TO ACHIEVE THE DESIRED RESULTS

Chapter Six –Planned Outcome Performance

OUTCOMES AND PERFORMANCE INFORMATION

&

OUTPUT DESCRIPTIONS

Defence’s outcome and output structure remains as reported in the Portfolio Budget Statements 2008-09, except for Health Services transferring from Output 1.6 Defence Support to Output 1.9 Vice Chief of the Defence Force. As part of the transfer, Health Services was also renamed Joint Health Command.

61

Chapter Six – Planned Outcome Performance

Figure 1.6.1 í Defence Outcome and Output Structure (as at 2 December 2008)

DEFENCE PORTFOLIO

DEFENCE

Outcome 1 Australia’s national interests are protected and advanced through the provision of military capabilities and the promotion of security and stability

Output Group 1.2 Navy Capabilities

Output 1.2.1 Navy

Headquarters

Output 1.2.2 Fleet

Headquarters

Output 1.2.3 Capability for Major Surface

Combatant Operations

Output 1.2.4 Capability for Naval Aviation

Operations

Output 1.2.5 Capability for Patrol Boat Operations

Output 1.2.6 Capability for Submarine Operations

Output 1.2.7 Capability for Afloat Support

Output 1.2.8 Capability for Mine Warfare

Output 1.2.9 Capability for

Amphibious Lift


Hydrographic and Oceanographic

Operations

Output 1.2.11 Navy Systems

Command

Output Group 1.3 Army Capabilities

Output Group 1.4 Air Force

Capabilities


Special Operations


Medium Combined Arms

Operations

Output 1.3.1 Army Command and Executive


Light Combined Arms Operations


Combat Support to Operations

Output 1.3.5 Capability for Army Aviation

Operations

Output 1.3.7 Capability for Operational

Logistics Support to Land Forces


Reserve Protective Operations

Output 1.3.9 Training Support

Army

Output 1.4.2 Air Command

Headquarters and Executive


Training Support

Output 1.4.1 Air Force

Headquarters Executive and

Agencies


Airlift Operations


Strategic Surveillance and Maritime Attack

Operations


Combat Support of Air Operations

Output 1.4.7 Capability for Air

Combat Operations

Output 1.4.8 Capability for Aerospace Operational

Output Group 1.5 Intelligence Capabilities

Output Group 1.6 Defence Support

Output Group 1.7 Defence Science and Technology

Output Group 1.8 Chief Information

Officer

Output Group 1.9 Vice Chief of the Defence Force

Output Group 1.14 Superannuation and

Housing Support Services for Current and Retired Defence Personnel and

other Administered Items

Output 1.6.2 Personnel Services

Output 1.6.1 Defence Support

Executive

Output 1.6.4 Infrastructure

Output 1.6.5 National

Operations

Output 1.6.3 Defence Legal

Output 1.14.2 Housing

Assistance

Output 1.14.3 Other

Administered (including UN

receipts)

Output 1.14.1 Superannuation

Output Group 1.1 Office of the

Secretary & CDF

Output 1.5.3 International

Policy

Output 1.5.2 Security

Output 1.5.1 Intelligence

Output Group 1.10 Joint Operations

Command

Output Group 1.11 Capability

Development

Output Group 1.12 Chief Finance

Officer

Output Group 1.13 People Strategies

and Policy

62


Figure 1.6.1 í Defence Outcome and Output Structure (as at 2 December 2008) continued

DEFENCE PORTFOLIO (Continued)

DEFENCE (Continued) DMO

Outcome 2 Military operations and other tasks

directed by the Government to achieve the desired results

Outcome 3 Defence’s support to the Australian community and civilian authorities to

achieve the desired results

Outcome 1 Defence capabilities are supported

through efficient and effective acquisition and through-life support of materiel

Output Group 2.1 Operations Contributing

to the Security of the Immediate

Neighbourhood

Output 2.1.1 Operation Astute

(net additional costs only)

Output 2.1.2 Operation Anode


Output Group 2.2 Operations Supporting

Wider Interests

Output 2.2.1 Operation Slipper


Output 2.2.2 Operation Catalyst


Output Group 3.1 Defence Contribution to National Support Tasks

in Australia

Output 3.1.1 Defence Force Aid to the Civil Power

Tasks (net additional costs

only)

Output 3.1.2 Defence Assistance

to the Civil Community Tasks


Output 3.1.3 Operation Resolute (net additional costs

only)

Output 3.1.4 Operation

Testament (net additional costs

only)

Output 1.1 Management of

Capability Acquisition

Output 1.2 Capability Sustainment

Output 1.3 Policy Advice and

Management Services

63

OUTCOME ONE – AUSTRALIA’S NATIONAL INTERESTS ARE PROTECTED AND ADVANCED THROUGH THE PROVISION OF

MILITARY CAPABILITIES AND THE PROMOTION OF SECURITY AND STABILITY

The strategy for this Outcome remains as reported in the Portfolio Budget Statements 2008-09.

Resource Statement Table 1.6.1 provides additional detail of Budget appropriations and the total resourcing for Outcome 1: Australia’s national interests are protected and advanced through the provision of military capabilities and the promotion of security and stability.

Table 1.6.1—Total Resources Available for Outcome One[1][2]

2008-09 Budget

estimate $’000

2008-09 Revised esti

$’000mate

2009-10 Forward esti

$’000mate

2010-11 Forward estimate


$’000Var

$’000 iation

Outcome One: Australia’s national interests are protected and advanced through the provision of military capabilities and the promotion of security and stability

$’000

Output group 1.1—Office of the Secretary and CDF Revenues from other sources 981

Departmental outputs 82,848

892

87,883

-90

5,036

904

79,592

914

80,573

933

80,115

Output group 1.2—Navy Capabilities Revenues from other sources 52,697

Departmental outputs 3,636,215

52,490

3,812,268

-206

176,052

44,453

3,757,757

44,367

3,693,598

46,042

3,728,921

Output group 1.3—Army Capabilities Revenues from other sources 65,986


59,803

4,795,768

-6,183

227,074

60,581

4,829,350

61,307

4,853,861

62,595

5,069,763

Output group 1.4—Air Force Capabilities Revenues from other sources 115,981


105,114

3,837,250

-10,867

-29,441

105,800

3,764,204

107,069

3,647,074

109,317

3,635,181

Output group 1.5—Intelligence Capabilities Revenues from other sources 36,269


32,947

629,247

-3,322

-18,548

33,652

667,967

26,371

657,337

24,180

666,807

Output group 1.6—Defence Support Administered items -specific purpose payment 23,300

Revenues from other sources 228,643


23,300

208,539

3,244,835

-

-20,104

136,211

-

214,682

3,365,865

-

219,781

3,479,449

-

228,118

3,523,760

Output group 1.7—Defence Science and Technology Revenues from other sources 24,537


25,390

385,070

853

33,081

31,262

397,442

31,637

388,882

32,302

391,042

Output group 1.8—Chief Information Officer Revenues from other sources 6,383


5,785

656,375

-598

-43,609

5,329

671,559

4,497

666,080

4,591

667,883


64

Output group 1.9—Vice Chief of the Defence Force Revenues from other sources 273,713 263,250 -10,463 266,673 269,874 275,537

Departmental outputs 262,016 325,503 63,487 322,349 315,648 324,044

Output group 1.10—Joint Operations Command Revenues from other sources 481 436 -45 441 447 456

Departmental outputs 48,437 38,763 -9,675 29,514 29,501 29,458

Output group 1.11—Capability Development Revenues from other sources - - - - - -

Departmental outputs 342,919 179,240 -163,679 485,103 552,339 890,149

Output group 1.12—Chief Finance Officer Revenues from other sources 6,220 44,826 38,606 64,434 73,525 76,862

Departmental outputs 421,723 736,970 315,248 2,091,881 2,798,403 2,389,263

Output group 1.13—People Strategies and Policy Revenues from other sources - - - - - -

Departmental outputs 341,132 370,112 28,980 360,882 365,765 361,997

Output group 1.14—Superannuation and Housing Support Services for Current and Retired Defence Personnel and other Administered Items Special appropriations: Defence Force Retirement Benefits Act, 1948 Part VIC, s.82ZJ (1)[3]

91,430 91,430 - 90,897

Defence Force Retirement and Death Benefits Act, 1973 Part XII, s.125 (3)[3]

90,301 89,590

1,439,070 1,439,070 - 1,430,693

Military Superannuation and Benefits Act, 1991 Part V, s.17[3]

1,360,200 1,360,200 - 1,465,300

Defence Force (Home Loans Assistance) Act, 1990 Part IV, s.38[3]

52,638 11,000 -41,638 6,000

Defence Home Ownership Assistance Scheme Act 2008 Part VI, s.84[3]

- 39,868 39,868 63,354

Parliamentary Entitlements Act, 1990 Part I, s.11[3] - - - -

1,421,299

1,573,500

6,000

82,324

-

1,410,110

1,686,600

6,000

100,177

-

Administered items 2,943,338 2,941,568 -1,770 3,056,244 3,173,424 3,292,477

Total resourcing Total departmental outputs 18,379,067 19,099,284 720,217 20,823,465 21,528,510 21,758,383

Total administered items 2,966,638 2,964,868 -1,770 3,056,244 3,173,424 3,292,477

Total revenue from other sources (s. 31)[4] 811,892 799,472 -12,420 828,211 839,789 860,933

Equity Injection 2,365,736 1,805,180 -560,556 4,372,754 5,238,354 5,079,787 Total resources for outcome 1 24,523,332 24,668,804 145,472 29,080,674 30,780,077 30,991,580


Notes 1. Departmental outputs = Expenses – Total income. 2. Revenues from other sources = Total revenue. 3. These are accrual estimates. 4. Does not include Net Capital Receipts (NCR). NCR forms part of the Capital Budget Statement (refer table 1.7.11 on p104).

65

Output Group 1.1 – Office of the Secretary and CDF

Performance information is as reported in the Portfolio Budget Statements 2008-09.

Cost summary for Output Group 1.1 Table 1.6.2—Cost summary

2008-09 Budget

estimate $’000


$’000 Variation

$’000


$’000


$’000


$’000

EXPENSES

Employees

Suppliers

Grants

Depreciation and amortisation

Finance cost Write-down of assets and impairment of assets

Net losses from sale of assets

Other expenses

Total expenses

53,564

29,812

89

354

– – – – – –

10

– – – – – –

– – – – – –

83,829

54,893

33,307

89

486

–

88,775

1,329

3,495

–

132

-10

4,946

54,063

25,832

90

511

–

80,496

55,778

25,007

91

611

–

81,487

57,619

22,740

93

596

–

81,048

INCOME

Revenues

Goods and services

Other revenue

Total revenue

Gains Reversals of previous asset write-downs

Net gain from sale of assets

Other gains

Total gains

Total income

-979

-3

-981

– – – – – –

– – – – – –

– – – – – –

– – – – – –

-981

-887

-5

-892

-892

92

-2

90

90

-899

-5

-904

-904

-909

-5

-914

-914

-928

-5

-933

-933

Net cost of 1.1 Office of the Secretary and CDF 82,848 87,883 5,036 79,592 80,573 80,115


66


Output Group 1.2 – Navy Capabilities

Performance information is as reported in the Portfolio Budget Statements 2008-09 except for the following revisions.

Table 1.6.3—2008-09 Force Element Targets

Output Vessel/Aircraft/Unit/Chart Production Number Budget Estimate Revised Estimate

1.2.4 Squirrels 13 4,000 Flying Hours 3,200 Flying Hours[1]

1.2.6 Submarines 6 684 URD 762 URD[2]

1.2.8 Coastal mine hunters 6 2,088 URD 2,071 URD[3]

Auxiliary minesweepers 2 730 URD 638 URD[4]

1.2.9 Heavy landing craft 6 1,958 URD 1,911 URD[5]

Survey motor launches 4 1,148 URD 1,016 URD[6]

1.2.10 Laser airborne depth sounder aircraft 1 900 Flying Hours 600 Flying Hours[7]

Defence Support: New Military Geographic Information (MGI) products/editions 10 30[8]

Notes 1. The decrease in Squirrel flying hours is due to a reduction in the number of pilot trainees. Navy is actively managing the

number of aircrew trainees in the system following the reduction in demand associated with the cancellation of the Super Seasprite program.

2. Unit Ready Days (URD) are the number of days that a force element is available for tasking, by the Fleet Commander, either outside of major maintenance and within planned readiness requirements or in accordance with contracted availability. The increase in the submarine URD is due to rescheduling of maintenance periods for HMAS Farncomb.

3. The decrease in the URD target for coastal mine hunters is due to the refit for HMAS Huon being brought forward to June 2009.

4. The decrease in the URD target for the auxiliary minesweepers is due to a refit extension for MSA Bandicoot as a result of a defect in the main propulsion shaft.

5. The decrease in the URD target for the heavy landing craft is due to the postponement of a mariner skills evaluation, following major maintenance, for HMAS Balikpapan from December 2008 to February 2009.

6. The decrease in the survey motor launches URD is due to an amendment of the upgrade schedule as a result of availability of the slipway and to take advantage of optimal tides for slipping. HMA Ships Mermaid and Paluma are now entering upgrades in early October 2008 and late November 2008, respectively, rather than late October and early December as originally planned.

7. The decrease in the laser airborne depth sounder aircraft flying hours is due to delays in the sensor upgrade. The aircraft was originally due to return to service in August 2008, but has been delayed because of technical issues from validation testing that identified key system deficiencies.

8. The increase in the target number for the new military geographic information products/editions is due to additional requirements for Border Protection Command.

67



2008-09 2008-09 2009-10 2010-11 2011-12 Budget

estimate Revised estimate Variation

Forward estimate

Forward estimate

Forward estimate

EXPENSES

$’000 $’000 $’000 $’000 $’000 $’000

Employees 1,312,505 1,346,212 33,707 1,410,417 1,470,492 1,533,008

Suppliers 1,355,147 1,458,069 102,922 1,410,229 1,370,479 1,434,890

Grants – – – – – –

Depreciation and amortisation 1,015,076 935,102 -79,974 850,648 750,025 659,350

Finance cost – 90,006 90,006 90,006 90,006 90,006

Write-down of assets and impairment of assets 31,684 58,663 26,979 62,822 76,074 76,094

Net losses from sale of assets – – – – – –

Other expenses – – – – – –

Total expenses 3,714,412 3,888,052 173,640 3,824,122 3,757,076 3,793,348

INCOME

Revenues Goods and services -47,647 -43,183 4,464 -44,353 -44,269 -45,939

Other revenue -5,049 -9,307 -4,258 -100 -98 -103

Total revenue -52,697 -52,490 206 -44,453 -44,367 -46,042

Gains Reversals of previous asset write-downs -25,500 -23,294 2,206 -21,912 -19,111 -18,385 Net gain from sale of assets – – – – – – Other gains – – – – – – Total gains -25,500 -23,294 2,206 -21,912 -19,111 -18,385 Total income -78,197 -75,784 2,412 -66,365 -63,478 -64,427

Net cost of 1.2 Navy Capabilities 3,636,215 3,812,268 176,052 3,757,757 3,693,598 3,728,921

68

Output Group 1.3 – Army Capabilities


Table 1.6.5—2008-09 Force Element Targets Aircraft Number Budget Estimate 2008-09

Flying Hours Revised Estimate

2008-09 Flying Hours

CH-47D Chinook 6 1,270 1,570[1]

Note 1. Increase due to operational flying hours for Operation Slipper.


2008-09 Budget

estimate $’000


$’000 Variation

$’000


$’000


$’000


$’000

EXPENSES

Employees

Suppliers

Grants




Other expenses

Total expenses

2,566,784

1,474,789

78

616,608

– – – – – –

18,121

– – – – – –

– – – – – –

4,676,379

2,676,425

1,732,040

10,078

446,579

29,935

4,895,057

109,641

257,251

10,000

-170,029

11,814

218,677

2,829,774

1,663,000

79

421,981

17,062

4,931,896

2,924,354

1,657,385

80

367,589

9,154

4,958,562

3,105,277

1,713,790

81

350,412

5,564

5,175,124

INCOME

Revenues

Goods and services

Other revenue

Total revenue

Gains

Reversals of previous asset write-downs


Other gains

Total gains

Total income

-65,986

– – – – – –

-65,986

-41,700 -38,163

–

– – – – – –

-41,700

-107,686

-59,803

-59,803

-1,323

-39,486

-99,289

6,183

6,183

3,537 -40,172

-1,323

2,214

8,397

-60,581

-60,581

-1,793

-41,965

-102,546

-61,307

-61,307

-41,204

-2,190

-43,394

-104,701

-62,595

-62,595

-39,869

-2,897

-42,766

-105,361

Net cost of 1.3 Army Capabilities 4,568,693 4,795,768 227,074 4,829,350 4,853,861 5,069,763


69

Output Group 1.4 – Air Force Capabilities


Table 1.6.7—2008-09 Force Element Targets Output 1.4.4: Capability for Airlift Operations

Aircraft Number Budget Estimate 2008-09 Flying Hours

Revised Estimate 2008-09 Flying Hours

C-17 Globemaster III 4 5,000 4,000[1]

Note 1. Reduction due to a number of factors including logistics, crewing and aircraft modifications that should be incrementally

improved during 2008-09 and fully remediated in 2009-10.


2008-09 2008-09 2009-10 2010-11 2011-12 Budget

estimate Revised estimate Variation

Forward estimate

Forward estimate

Forward estimate

$’000 $’000 $’000 $’000 $’000 $’000

EXPENSES

Employees 1,340,578 1,378,432 37,854 1,426,118 1,487,684 1,544,839

Suppliers 1,479,011 1,615,457 136,446 1,593,501 1,557,546 1,631,522

Grants – – – – – –

Depreciation and amortisation 1,176,091 938,132 -237,959 838,461 695,908 553,755

Finance cost – 7,885 7,885 7,885 7,885 7,885

Write-down of assets and impairment of assets 19,693 32,407 12,714 36,907 39,520 47,864

Net losses from sale of assets – – – – – –

Other expenses – – – – – –

Total expenses 4,015,372 3,972,313 -43,060 3,902,872 3,788,543 3,785,865

INCOME

Revenues

Goods and services -115,981 -105,114 10,867 -105,800 -107,069 -109,317

Other revenue – – – – – –

Total revenue -115,981 -105,114 10,867 -105,800 -107,069 -109,317

Gains

Reversals of previous asset write-downs -32,700 -29,949 2,751 -32,868 -34,400 -41,367

Net gain from sale of assets – – – – – –

Other gains – – – – – –

Total gains -32,700 -29,949 2,751 -32,868 -34,400 -41,367

Total income -148,681 -135,063 13,618 -138,668 -141,469 -150,684

Net cost of 1.4 Air Force Capabilities 3,866,691 3,837,250 -29,442 3,764,204 3,647,074 3,635,181


70

Output Group 1.5 – Intelligence Capabilities



2008-09 Budget

estimate $’000


$’000 Variation

$’000


$’000


$’000


$’000

EXPENSES

Employees

Suppliers

Grants




Other expenses

Total expenses

269,147

353,441

– – – – – –

59,885

– – – – – –

1,591

– – – – – –

– – – – – –

684,064

275,959

347,816

42,207

205

666,187

6,812

-5,625

-17,678

-1,386

-17,877

295,523

370,398

35,566

132

701,619

309,260

350,390

24,058

–

683,708

317,246

350,539

23,202

–

690,987

INCOME

Revenues

Goods and services

Other revenue

Total revenue

Gains



Other gains

Total gains

Total income

-36,188

-81

-36,269

–

– – – – – –

– – – – – –

–

-36,269

-32,797

-150

-32,947

-3,993

-3,993

-36,940

3,391

-69

3,322

-3,993

-3,993

-671

-33,500

-152

-33,652

–

–

-33,652

-26,217

-154

-26,371

–

–

-26,371

-24,023

-157

-24,180

–

–

-24,180

Net cost of 1.5 Intelligence Capabilities 647,795 629,247 -18,548 667,967 657,337 666,807


Defence Cooperation Program


71


Output Group 1.6 - Defence Support


On 12 September 2008 the Health Services Division was transferred to VCDF and renamed the Joint Health Command. All information that related to health services that was reported in the Portfolio Budget Statements 2008-09 has moved to Output Group 1.9 (VCDF).


2008-09 Budget

estimate $’000


$’000 Variation

$’000


$’000


$’000


$’000

EXPENSES

Employees

Suppliers

Grants




Other expenses

Total expenses

1,204,934

1,406,578

1,390

672,867

48,925

1,632

–

941

3,337,266

1,234,825

1,500,870

1,397

660,791

49,163

14,737

–

882

3,462,665

29,891

94,292

7

-12,076

238

13,105

–

-59

125,398

1,300,172

1,533,616

1,415

680,718

60,307

16,784

–

893

3,593,905

1,358,605

1,552,195

1,432

712,367

61,943

17,972

–

904

3,705,418

1,414,644

1,529,183

1,462

743,795

63,515

–

–

923

3,753,522

INCOME

Revenues

Goods and services

Other revenue

Total revenue

Gains



Other gains

Total gains

Total income

-227,235

-1,408

-228,643

–

–

–

–

-228,643

-204,879

-3,660

-208,539

-4,326

-4,965

–

-9,291

-217,830

22,356

-2,252

20,104

-4,326

-4,965

–

-9,291

10,813

-210,974

-3,708

-214,682

-4,748

-8,610

–

-13,358

-228,040

-217,095

-2,686

-219,781

-4,969

-1,219

–

-6,188

-225,969

-225,376

-2,742

-228,118

–

-1,644

–

-1,644

-229,762

Net cost of 1.6 Defence Support 3,108,623 3,244,835 136,211 3,365,865 3,479,449 3,523,760

72

Output Group 1.7 – Defence Science and Technology



2008-09 Budget

estimate $’000


$’000 Variation

$’000


$’000


$’000


$’000

EXPENSES

Employees

Suppliers

Grants


Finance cost

Write-down of assets and impairment of assets


Other expenses

Total expenses

252,407

106,081

– – – – – –

17,924

– – – – – –

114

– – – – – –

– – – – – –

376,527

259,090

131,418

20,028

90

410,626

6,683

25,337

2,104

-24

34,100

281,386

128,877

18,522

102

428,887

292,130

112,265

16,205

110

420,710

303,686

103,026

16,729

133

423,574

INCOME

Revenues

Goods and services

Other revenue

Total revenue

Gains



Other gains

Total gains

Total income

-21,173

-3,364

-24,537

–

– – – – – –

– – – – – –

–

-24,537

-19,189

-6,201

-25,390

-166

-166

-25,556

1,984

-2,837

-853

-166

-166

-1,019

-22,609

-8,653

-31,262

-183

-183

-31,445

-22,880

-8,757

-31,637

-191

-191

-31,828

-23,361

-8,941

-32,302

-230

-230

-32,532

Net cost of 1.7 Defence Science and Technology 351,990 385,070 33,081 397,442 388,882 391,042


73

Output Group 1.8 – Chief Information Officer



2008-09 Budget

estimate $’000


$’000 Variation

$’000


$’000


$’000


$’000

EXPENSES

Employees

Suppliers

Grants




Other expenses

Total expenses

90,698

524,144

– – – – – –

89,102

– – – – – –

2,423

– – – – – –

– – – – – –

706,367

92,948

488,970

80,242

–

662,160

2,250

-35,174

-8,860

-2,423

-44,207

96,585

502,955

77,348

–

676,888

99,287

493,131

78,159

–

670,577

106,416

489,022

77,036

–

672,474

INCOME

Revenues

Goods and services

Other revenue

Total revenue

Gains



Other gains

Total gains

Total income

-6,383

– – – – – –

-6,383

– – – – – –

– – – – – –

– – – – – –

– – – – – –

-6,383

-5,785

-5,785

-5,785

598

598

598

-5,329

-5,329

-5,329

-4,497

-4,497

-4,497

-4,591

-4,591

-4,591

Net cost of 1.8 Chief Information Officer 699,984 656,375 -43,609 671,559 666,080 667,883


74


Output Group 1.9 – Vice Chief of the Defence Force


On 12 September 2008 Joint Health Command transferred from Defence Support Group to the Vice Chief of the Defence Force Group.

Cost summary for Output Group 1.9

75

Table 1.6.13—Cost summary 2008-09 Budget

estimate $’000


$’000 Variation

$’000


$’000


$’000


$’000

EXPENSES

Employees

Suppliers

Grants




Other expenses

Total expenses

153,622

355,449

– – – – – –

339

– – – – – –

26,419

– – – – – –

– – – – – –

535,829

157,471

428,448

2,708

234

588,861

3,849

72,999

2,369

-26,185

53,032

159,510 162,268

425,165

4,200

266

589,141

417,496

5,597

285

585,646

165,448

426,701

7,236

345

599,730

INCOME

Revenues

Goods and services

Other revenue

Total revenue

Gains



Other gains

Total gains

Total income

-241,319

-32,394

-273,713

-100

– – – – – –

– – – – – –

-100

-273,813

-218,678

-44,572

-263,250

-108

-108

-263,358

22,641

-12,178

10,463

-8

-8

10,455

-221,521

-45,152

-266,673

-119

-119

-266,792

-224,180

-45,694

-269,874

-124

-124

-269,998

-228,884

-46,653

-275,537

-149

-149

-275,686

Net cost of 1.9 Vice Chief of the Defence Force 262,016 325,503 63,487 322,349 315,648 324,044

Output Group 1.10 – Joint Operations Command



EXPENSES

Employees

Suppliers

Grants




Other expenses

Total expenses

INCOME

Revenues

Goods and services

Other revenue

Total revenue



Other gains

Total gains

Total income

2008-09 Budget

estimate $’000

6,177

40,161

– – – – – –

2,587

– – – – – –

-6

– – – – – –

– – – – – –

48,918

-481

– – – – – –

-481

– – – – – –

– – – – – –

– – – – – –

– – – – – –

-481


$’000

6,330

32,838

31

–

39,199

-436

-436

-436

Variation $’000

153

-7,323

-2,556

6

-9,720

45

45

45


$’000


$’000


$’000

6,668

23,226

61

–

29,955

7,049

22,807

92

–

29,948

7,331

22,461

122

–

29,914

-441

-441

-441

-447

-447

-447

-456

-456

-456

Net cost of 1.10 Joint Operations Command 48,437 38,763 -9,675 29,514 29,501 29,458


76

Output Group 1.11 – Capability Development



2008-09 Budget

estimate $’000


$’000 Variation

$’000


$’000


$’000


$’000

EXPENSES

Employees

Suppliers

Grants




Other expenses

Total expenses

24,712

317,938

– – – – – –

269

– – – – – –

– – – – – –

– – – – – –

– – – – – –

342,919

25,325

153,431

484

179,240

613

-164,507

215

-163,679

24,308

460,571

224

485,103

24,737

527,483

119

552,339

25,238

864,800

111

890,149

INCOME

Revenues

Goods and services

Other revenue

Total revenue



Other gains

Total gains

Total income

– – – – – –

– – – – – –

– – – – – –

– – – – – –

– – – – – –

– – – – – –

– – – – – –

– – – – – –

Net cost of 1.11 CapabilityDevelopment 342,919 179,240 -163,679 485,103 552,339 890,149


77

Table 1.6.16—Cost summary 2008-09 Budget

estimate $’000


$’000 Variation

$’000


$’000


$’000


$’000

EXPENSES

Employees

Suppliers

Grants




Other expenses

Total expenses

374,090

31,172

–

2,148

–

28,230

–

2

435,642

289,368

49,250

-8

523,226

-98,129

225,399

–

60

989,174

-84,722

18,078

-8

521,078

-98,129

197,169

–

58

553,532

632,808

865,484

-9

752,676

-97,891

183,495

–

29

2,336,601

811,985

1,259,899

-9

913,448

-97,891

153,456

–

29

3,040,926

633,173

1,071,424

-7

869,019

-97,891

114,870

–

21

2,591,116

INCOME

Revenues

Goods and services

Other revenue

Total revenue



Other gains

Total gains

Total income

-2,975

-3,245

-6,220

–

–

-7,700

-7,700

-13,920

-18,520

-26,306

-44,826

-200,508

830

-7,700

-207,378

-252,204

-15,545

-23,061

-38,606

-200,508

830

–

-199,678

-238,284

-75,265

10,831

-64,434

-173,824

1,238

-7,700

-180,286

-244,720

-84,488

10,963

-73,525

-161,627

329

-7,700

-168,998

-242,523

-88,464

11,602

-76,862

-117,567

276

-7,700

-124,991

-201,853

Net cost of 1.12 Chief Finance Officer 421,723 736,970 315,248 2,091,881 2,798,403 2,389,263


Output Group 1.12 – Chief Finance Officer



78

Output Group 1.13 – People Strategies and Policy



2008-09 Budget

estimate $’000


$’000 Variation

$’000


$’000


$’000


$’000

EXPENSES

Employees

Suppliers

Grants




Other expenses

Total expenses

86,058

248,102

–

6,884

–

88

–

341,132

–

88,193

281,801

–

118

–

–

–

–

370,112

2,135

33,699

–

-6,766

–

122

-88

–

–

28,980

95,402

265,358

–

–

–

–

–

360,882

101,707

263,963

–

95

–

–

–

–

365,765

108,147

253,770

–

80

–

–

–

361,997

–

INCOME

Revenues

Goods and services

Other revenue

Total revenue

Gains



Other gains

Total gains

Total income

– – – – – –

– – – – – –

– – – – – –

– – – – – –

– – – – – –

– – – – – –

– – – – – –

– – – – – –

Net cost of 1.13 People Strategies and Policy 341,132 370,112 28,980 360,882 365,765 361,997


79

Output Group 1.14 – Superannuation and Housing Support Servicesfor Current and Retired Defence Personnel and Other Administered Items


Cost Summary of Output Group 1.14 Table 1.6.18—Cost summary

2008-09 Budget

estimate $’000


$’000 Variation

$’000


$’000


$’000


$’000

EXPENSES

Net foreign exchange losses

Housing subsidies

Retention benefits

Military superannuation benefits

Total expenses

–

52,638

42,000

2,848,700

2,943,338

–

50,868

42,000

2,848,700

2,941,568

–

-1,770

–

–

-1,770

–

69,354

40,000

2,946,890

3,056,244

–

88,324

38,000

3,047,100

3,173,424

–

106,177

36,000

3,150,300

3,292,477

REVENUE

Interest

Net foreign exchange gain

Dividends

Licence fees Military superannuation contributions

Other

Total revenue -796,741 -777,567 19,174 -815,565 -824,871 -883,720

-13

–

-60,448

-4,711

-731,000

-569

-187

–

-41,100

-4,711

-731,000

-569

-174

–

19,348

–

–

–

13

–

-42,800

-12,775

-760,000

-3

13

–

-44,200

-20,681

-760,000

-3

13

–

-64,058

-26,672

-793,000

-3

Net cost of output group 1.14 2,146,597 2,164,001 17,404 2,240,679 2,348,553 2,408,757


80

OUTCOME WO ILITARY PERATIONS AND THER ASKS DIRECTED BY THE GOVERNMENT TO ACHIEVE THE DESIRED

RESULTS


Resource Statement Table 1.6.19 provides additional detail of Budget appropriations and the total resourcing for outcome 2: Military operations and other tasks directed by Government to achieve the desired results.

Table 1.6.19—Total resources available for Outcome Two

T – M O O T

2008-09 Budget

estimate $’000


$’000 Variation

$’000


$’000


$’000


$’000 Outcome Two: Military operations and other tasks directed by Government achieve the desired results

Output group 2.1 – Operations Contributing to the Security of the Immediate Neighbourhood

Revenues from other sources - 11,715 Departmental outputs 202,311 197,166 Output group 2.2 – Operations Supporting Wider Interests

11,715

-5,145

- - -

18,700 - -

Revenues from other sources Departmental outputs Total resources for outcome 2

-

797,796

1,000,107

-

921,900

1,130,781

-

124,104

130,674

-

138,057

156,757

- -

2,860 -

2,860 -


81


Output Group 2.1 – Operations contributing to the security of the immediate neighbourhood


82

Table 1.6.20—Cost summary 2008–09 Budget

estimate $’000


$’000 Variation

$’000


$’000


$’000


$’000

EXPENSES

Employees

Suppliers

Grants




Other expenses

Total expenses

45,618

156,693

– – – – – –

– – – – – –

– – – – – –

– – – – – –

– – – – – –

– – – – – –

202,311

43,526 -2,092

165,355

208,881

8,662

6,570

–

18,700

18,700

–

–

–

–

–

–

INCOME

Revenues

Goods and services

Other revenue

Total revenue

Gains



Other gains

Total gains

Total income

–

– – – – – –

–

– – – – – –

– – – – – –

– – – – – –

– – – – – –

– -11,715 -11,715

-11,715

-11,715

-11,715

-11,715

–

–

–

–

–

–

–

–

–

Net cost of 2.1 Operations contributing to the security of the immediate

neighbourhood 202,311 197,166 -5,145 18,700 – –

2008-09 Budget

estimate $’000


$’000 Variation

$’000


$’000


$’000


$’000

EXPENSES

Employees

Suppliers

Grants




Other expenses

Total expenses

160,418

637,378

– – – – – –

– – – – – –

– – – – – –

– – – – – –

– – – – – –

– – – – – –

797,796

198,300

723,600

921,900

37,882

86,222

124,104

–

138,057

138,057

–

2,860

2,860

–

–

–

INCOME

Revenues

Goods and services

Other revenue

Total revenue

Gains



Other gains

Total gains

Total income

– – – – – –

– – – – – –

– – – – – –

– – – – – –

– – – – – –

– – – – – –

– – – – – –

– – – – – –

Net cost of 2.2 Operations supporting wider interests 797,796 921,900 124,104 138,057 2,860 –


Output Group 2.2 – Operations supporting wider interests


83


OUTCOME THREE – DEFENCE’S SUPPORT TO THE AUSTRALIAN COMMUNITY AND CIVILIAN AUTHORITIES TO ACHIEVE THE DESIRED

RESULTS


Resource Statement Table 1.6.22 provides additional detail of Budget appropriations and the total resourcing for outcome 3: Defence’s support to the Australian community and civilian authorities to achieve the desired results.

Table 1.6.22—Total resources available for Outcome Three 2008-09 2008-09 2009-10 2010-11 2011-12 Budget Revised Forward Forward Forward

estimate estimate Variation estimate estimate estimate $’000 $’000 $’000 $’000 $’000 $’000

Outcome Three: Defence’s support to the Australian community and civilian authorities achieve the desired Output group 3.1 – Defence Contribution to National Support Tasks in Australia

Revenues from other sources - - - - - -Departmental outputs 12,863 12,863 - 13,060 13,387 -Total resources for outcome 3 12,863 12,863 - 13,060 13,387 -

84

Output Group 3.1 – Defence Contribution to National Support Tasks in Australia


2008-09 Budget

estimate $’000


$’000 Variation

$’000


$’000


$’000


$’000

EXPENSES

Employees

Suppliers

Grants




Other expenses

Total expenses

–

12,863

–

–

–

–

–

–

12,863

–

12,863

–

–

–

–

–

–

12,863

–

–

–

–

–

–

–

–

–

–

13,060

–

–

–

–

–

–

13,060

–

13,387

–

–

–

–

–

–

13,387

–

–

–

–

–

–

–

–

–

INCOME

Revenues

Goods and services

Other revenue

Total revenue

Gains



Other gains

Total gains

Total income

–

–

–

–

–

–

–

–

–

– –

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

Net cost of 3.1 Defence Contribution to National Support Tasks in

Australia 12,863 12,863 – 13,060 13,387 –


85

SECTION THREE

EXPLANATORY TABLES AND FINANCIAL STATEMENTS

CHAPTER SEVEN —EXPLANATORY TABLES AND BUDGETED FINANCIAL

STATEMENTS

EXPLANATORY TABLES

BUDGETED FINANCIAL STATEMENTS

Chapter Seven – Explanatory Tables and Budgeted Financial Statements

EXPLANATORY TABLES

Reconciliation of total available appropriation The Defence Resource Statement (Table 1.2.2) details the total available appropriation available to an agency from all sources. For departmental appropriations, this includes carry-forward amounts as well as amounts appropriated at Budget and Additional Estimates. As agencies incur and are funded for future liabilities, general depreciation and employee entitlements, the total amount of departmental appropriation available to an agency is unlikely to be fully utilised in the Budget year. Outcome resource statements include details of the expected use of available resources in contributing towards outcomes in the Budget year. The difference between the agency level resource statement and the sum of all outcome resource statements is the expected carry-forward amount of resources for the 2009-10 Budget year, including amounts related to meeting future obligations to maintain the agency’s asset base and to meet employee entitlement liabilities. Table 1.7.1 reconciles the total available.

Table 1.7.1—Reconciliation of total available appropriation and outcomes 2008-09

$'000 Total available departmental operating appropriation (outputs)

Less total attributed in outcome resource statements

Estimated departmental operating appropriation carry-forward for 2008-09 (outputs)

20,393,130

20,231,213

161,917

Special account flows Special accounts provide a means to set aside and record amounts used for specified purposes. Special accounts can be created by a Finance Minister’s Determination under the Financial Management and Accountability Act 1997 or under separate enabling legislation. Table 1.7.2 shows the expected additions (receipts) and reductions (payments) for each account used by Defence.

91

[1][2][3][4][5]Table 1.7.2—Summary of estimated special account flows Opening balance

Receipts Payments Adjustments Closing balance

2008-09 2007-08

$'000

2008-09 2007-08

$'000

2008-09 2007-08

$'000

2008-09 2007-08

$'000

2008-09 2007-08

$'000 Services for Other Governments and Non-Agency Bodies – Financial Management and Accountability Act 1997

58,402 23,484

45,858 65,205

62,712 30,287

- 41,548 - 58,402

Defence Endowments – Financial Management and Accountability Act 1997[4][5]

297 306

37 27

46 36

- 288 - 297

Fedorczenko Legacy Fund – Financial Management and Accountability Act 1997[4][5]

156 160

-10

10 14

- 146 - 156

Other Trust Monies – Financial Management and Accountability Act 1997

2,058 4,271

3,217 3,037

2,996 5,250

- 2,279 - 2,058

Young Endeavour Youth Program Operating and Public Fund– Financial Management and Accountability Act 1997 Total

866 875

42 84

9 93

- 899 - 866

Special accounts 2008-09 Special accounts 2007-08

61,779 29,096

49,154 68,363

65,773 35,680

- 45,160 - 61,779

Notes 1. 2008-09 estimates in bold. 2. 2007-08 actuals in italics. 3. These are all Special Public Monies and are not funded from department or administered funding. 4. The 2007-08 figures include $11,272 for interest earned on the Official Public Account (OPA). 5. The 2008-09 figures include an estimate of $26,000 for interest earned on the OPA.

AUSTRALIAN GOVERNMENT INDIGENOUS EXPENDITURE

Table 1.7.3—Defence Australian Government Indigenous expenditure


2008-09 Budget

Estimate $'000

2008-09 Revised

Estimate $'000

Variation $’000

Indigenous Recruitment and Retention Strategy Australian Defence Force Cadets – Indigenous Participation Program Army Aboriginal Community Assistance Program Total

490 330

3,011

3,831

490 330

3,011

3,831

---

-

No new initiatives have been approved since the Portfolio Budget Statements 2008-09.

92


DISCRETIONARY GRANTS

New grants approved since the publishing of the Portfolio Budget Statements 2008-09 total $1.220m in 2008-09, with two grants programs and one grant approved.

Table 1.7.4—Discretionary grants 2008-09 2008-09 Budget Revised

Estimate Estimate Variation $'000 $'000 $’000

Army Military History Research Grants Scheme - 75 75 Defence Family Support Funding Program - 1,045 1,045

Kokoda Foundation - 100 100 Total discretionary grants - 1,220 1,220

Army Military History Research Grants Scheme This scheme supports and encourages research into the role and involvement of the Army in the development of the nation. The scheme has been in operation since 1992.

Defence Family Support Funding Program The Defence Family Support Funding Program provides funds to support projects and services initiated by Defence families. The program is also available to existing groups in the community composed of, or benefiting, Defence families.

Grant to the Kokoda Foundation This grant to the Kokoda Foundation was to support the Australia-United States Trilogy Dialogue that was held on 20-23 November 2008. The Kokoda Foundation is a not-for-profit organisation that focuses on issues relating to national security and whole-of-nation responses to crises and threats, and fosters research and innovative thinking on Australia’s future security challenges.

93



The information remains as presented as in the Portfolio Budget Statements 2008-09.

ANALYSIS OF DEPARTMENTAL BUDGETED FINANCIAL

STATEMENTS

Revised departmental Income Statement Since the 2008-09 Budget, total income and total expenses have each increased by $1,044.4m. Details are shown in Table 1.7.5 and an explanation of the financial variations follows.

Table 1.7.5—Variation in planned income statement 2008-09 2008-09 Budget

estimate

2008-09 Revised estimate Variation

$'000 $'000 $'000 % INCOME

Revenue

Revenue from Government for outputs 19,392,037 20,231,213 839,176 4.3

Sales of goods and rendering of services 766,347 720,986 -45,361 -5.9

Other revenue 45,545 90,201 44,656 98.0

Total revenue 20,203,929 21,042,400 838,471 4.2

Gains

Reversal of previous asset write-downs 100,000 300,507 200,507 200.5

Sale of Assets – 5,458 5,458 –

Other gains 7,700 7,700 – –

Total gains 107,700 313,665 205,965 191.2

Total income 20,311,629 21,356,065 1,044,436 5.1

EXPENSES

Employees 7,941,313 8,127,297 185,984 2.3

Suppliers 8,528,758 9,155,541 626,783 7.3

Grants 1,556 11,556 10,000 642.7

Depreciation and amortisation 3,660,134 3,650,134 -10,000 -0.3

Finance costs 48,925 48,925 – –

Write-down and impairment of assets 130,000 361,670 231,670 178.2

Other expenses Total expenses

943 20,311,629

942 21,356,065

-1 1,044,436

-0.1 5.1

Operating result – – – –

Income Income is estimated to increase by $1,044.4m or 5.1 per cent due to:

• increased ‘revenue from Government for outcomes’ of $839.2m as a result of:

– implementation of the following budget measures totalling $89.9m:

: Operations in the Middle East – infrastructure upgrade and expansion ($4.0m)

: Iraq – contribution to international stabilisation activities ($87.8m)

: Afghanistan – helicopter capability ($3m) and

: East Timor – reduced Australian Defence Force presence (-$5.1m)

94


: Implementation of Operation Sunlight ($0.2m).

– other budget adjustments totalling $749.3m:

: Budget remediation to realign capital/recurrent split of expenditure ($278.2m)

: a revision to the price parameters used in the 2008-09 Budget – operating component only (-$12.1m)

: movements in foreign exchange reflecting the difference between current foreign exchange parameters and those on which the 2008-09 Budget was based ($153.3m)

: bring forward of 2007-08 reprogramming ($307.0m)

: other reprogramming – operating component only (-$6.5m)

: reconciliation of 2007-08 operations expenditure ($29.4m)

: Defence Home Ownership Assistance Scheme administration costs ($1.8m)

: Efficiency Dividend adjustment (-$1.8m).

• decreased ‘sales of goods and rendering of services’ (-$45.4m) offset by increased ‘other revenue’ ($44.7m) because of a change in categories.

• an increase in ‘reversals of previous asset write-downs’ due to revised estimates based on actual outcome of 2007-08 ($200.5m)

• increased sale of assets ($5.5m).

Expenses Expenses are estimated to increase by $1,044.4m or 5.1 per cent due to:

• an increase in ‘employee’ expenses of $186.0m resulting from:

– implementation of the following budget measures:

: Iraq – contribution to international stabilisation activities ($37.9m) and

: East Timor – reduced Australian Defence Force presence (-$2.1m )

– Budget remediation to realign capital/recurrent split of expenditure ($146.5m)

– movements in foreign exchange reflecting the difference between current foreign exchange parameters and those on which the 2008-09 Budget was based ($3.6m).

• an increase in ‘suppliers’ expenses of $626.8m resulting from:

– implementation of the following budget measures:


: Afghanistan – helicopter capability ($3.0m)

: Operations in the Middle East – infrastructure upgrade and expansion ($3.9m)

: East Timor – reduced Australian Defence Force presence (-$3.0m)

: Operation Sunlight – improved Budget transparency ($0.2m).

– other budget adjustments:

: bring forward of 2007-08 reprogramming ($307.0m)


: Budget remediation to realign capital/recurrent split of expenditure ($98.5m)

95


: reconciliation of 2007-08 operations expenditure ($29.4m)

: a revision to the price parameters used in the 2008-09 Budget – operating component only (-$12.1m)

: Defence Home Ownership Assistance Scheme administration costs ($1.8m)

: Efficiency Dividend adjustment (-$1.8m).

• an increase in ‘write-down and impairment of assets’ due to revised estimates based on actual for 2007-08 ($231.7m).

REVISED DEPARTMENTAL BALANCE SHEET

Since the 2008-09 Budget, Defence’s net asset value has increased by $96.5m or 0.2 per cent. Details are shown in Table 1.7.6 and an explanation of the financial variations follows.

96

Table 1.7.6—Variation in planned balance sheet 2008-09 2008-09 Budget

estimate $'000


$'000 Variation

$'000 %

ASSETS Financial assets Cash and cash equivalents Appropriation receivable Other receivables Total financial assets

32,007 158,802 238,056 428,865

29,223 132,694 214,822 376,739

-2,784 -26,108 -23,234 -52,126

-8.7 -16.4

-9.8 -12.2

Non-financial assets Land and buildings Specialist military equipment Infrastructure, plant and equipment Intangibles Heritage and cultural assets Inventories Other non-financial assets Total non-financial assets

12,911,350 33,934,604

5,646,537 241,320 764,244

5,317,236 1,188,133

60,003,424

13,169,827 34,017,916

5,773,973 369,846 805,587

5,194,707 973,843

60,305,699

258,477 83,312

127,436 128,526

41,343 -122,529 -214,290 302,275

2.0 0.2 2.3

53.3 5.4

-2.3 -18.0

0.5

Assets held for sale Total assets

144,375 60,576,664

427,220 61,109,658

282,845 532,994

195.9 0.9

LIABILITIES Debt Leases Other interest bearing liabilities Total debt

755,528 2,254[1]

757,782

863,370 -

863,370

107,842 -2,254

105,588

14.3 -100.0

14.3

Provisions and payables Employees Suppliers Other Total provisions and payables

1,843,251

810,899 708,535

3,362,685

1,985,056 871,227

837,345[1]

3,693,629

141,805 60,328

128,810 330,944

7.7 7.4

18.2 9.8

Total liabilities 4,120,467 4,556,998 436,531 10.6

Net assets 56,456,197 56,552,660 96,463 0.2

EQUITY Capital Reserves Retained surpluses or accumulated deficits

Total equity

9,505,547

11,900,863 35,049,787 56,456,197

8,956,516 12,834,121 34,762,023 56,552,660

-549,031 933,258

-287,764 96,463

-5.8 7.8

-0.8 0.2


Note 1. Other interest bearing liabilities have been reclassified to Other Payables in the Revised Estimate consistent with the

Defence 2007-08 actual financial statements.

Assets Total assets are estimated to be $61.1b at 30 June 2009. This is $533.0m or 0.9 per cent greater than the estimate published in the Portfolio Budget Statements 2008-09.

Total financial assets are $52.1m lower than projected in the 2008-09 Budget due to:

• A decrease in cash and cash equivalents due to the flow-on effect of the actual opening balance at 1 July 2008 being higher than the projected 2007-08 result on which the original budget estimate was based ($-2.8m)

• A decrease in the appropriation receivable of $26.1m due to:

97


– the flow-on effect of the actual opening balance being higher than the projected 2007-08 result ($33.6m)

– hand-back of ‘no-win-no-loss’ 2007-08 operations expenditure (-$10.1m)

– hand-back of ‘no-win-no-loss’ 2007-08 gain from a stronger Australian dollar in 2007-08 (-$39.6m)

– carry-over of SAS Trust Fund contribution (-$10.0).

Total non-financial assets are $302.3m higher than projected due to:

• the budgeted value of ‘land and buildings’ will grow by $258.5m due to:

– the flow-on effect of the actual opening balance being higher than the projected 2007-08 result ($368.7m)

– Budget remediation to realign capital/recurrent split of expenditure (-$131.7m)

– Operations in the Middle East – infrastructure upgrade and expansion ($11.5m)

– Other adjustments ($10.0m).

• the budgeted value of ‘specialist military equipment’ assets will increase by $83.3m due to:

– An increase due to the flow-on effect of the actual opening balance at 1 July 2008 being higher than the projected 2007-08 result on which the original budget estimate was based ($502.1m)

– a decrease in the value of planned asset purchases in line with revised price parameters used in the 2008-09 Additional Estimates (-$6.1m)

– movements in foreign exchange reflecting the difference between current foreign exchange parameters and those on which the 2008-09 Budget was based ($429.4m)

– reprogramming of the Approved Major Capital Investment Program (-$514.0m)


– Iraq – contribution to international stabilisation activities ($3.0m).

• the budgeted value of ‘infrastructure, plant and equipment’ assets will increase by $127.4m due to:

– actual opening balance being higher than the projected 2007-08 result ($66.3m)

– Budget remediation to realign capital/recurrent split of expenditure ($59.6m)

– Iraq – contribution to international stabilisation activities ($1.5m).

• the budgeted value of ‘intangibles’ will increase by $128.5m due to

– actual opening balance being higher than the projected 2007-08 result ($112.5m)

– Budget remediation to realign capital/recurrent split of expenditure ($16.0m).

• the budgeted value of ‘heritage and cultural assets’ will increase by $41.3m due to an actual opening balance higher than projected.

• the budgeted value of ‘inventories’ will decrease by $122.5m due to:


– Other movements (-$7.5m).

• the budgeted value of ‘other non-financial assets’ will decrease by $214.3m due to reprogramming of the Approved Major Capital Investment Program.

Assets held for sale are $282.8m higher than projected due to the actual opening balance being higher than projected.

98


Liabilities Total liabilities are estimated to be $4.6b at 30 June 2009. This is $436.5m or 10.6 per cent higher than projected in the Portfolio Budget Statements 2008-09.

Total debt is $105.6m higher than projected in the 2008-09 Budget.

Total provisions and payables are $330.9m higher than projected due to:

– an increase in ‘employee provisions’ ($141.8m)

– an increase in ‘supplier payables’ ($60.3m)

– an increase in ‘other provisions and payables’ ($128.8m).

Equity Equity is estimated to be $56.6b at 30 June 2009. This represents an increase of $96.5m or 0.2 per cent from the estimate published in the Portfolio Budget Statements 2008-09.

Capital (contributed equity) is the amount that the Government as owner has invested in Defence. Restructuring activities, equity appropriations and returns made by Defence to the Official Public Account are included in the calculation of contributed equity.

• capital will reduce by $549.0m due to:

– a decrease in equity injection resulting from:

: actual opening balance higher than projected ($50.9m)

: Budget remediation to realign capital/recurrent split of expenditure (-$278.0m)


: reprogramming of the Approved Major Capital Investment Program (-$514.0m)

: reprogramming of the Enhanced Land Force (-$207.6m)

: a revision to the price parameters used in the 2008-09 Budget – capital component only (-$6.1m)

: Operations in the Middle East - infrastructure upgrade and expansion ($11.5m)


• Reserves represent the Asset Revaluation Reserves of Defence and are affected by asset revaluation activities undertaken during the year. Reserves will increase by $933.3m due to the actual opening balance being higher than projected

• Retained surpluses or accumulated deficits represent the cumulative surpluses or deficits of Defence. The surplus is forecast to decrease by $287.8m due to the actual opening balance being higher than projected.

99

2008-09 DEPARTMENTAL BUDGETED FINANCIAL STATEMENTS

Table 1.7.7—Budgeted departmental income statement 2007-08 2008-09 2009-10 2010-11 2011-12

Actual Revised Budget

Forward estimate

Forward estimate

Forward estimate

$'000 $'000 $'000 $'000 $'000

INCOME Revenue

Revenues from Government 19,693,267 20,231,213 20,993,282 21,544,757 21,758,383 Sales of Goods and Services 688,840 720,986 781,272 793,358 813,934 Other revenue 83,306 90,201 46,939 46,431 46,999

Total revenue 20,465,413 21,042,400 21,821,493 22,384,546 22,619,316

Gains Reversals of previous asset write-downs 615,330 300,507 273,826 261,626 217,567 Sale of assets – 5,458 9,165 3,080 4,265 Foreign exchange 1,077 – – – – Other gains

Total gains

Total income

3,295 7,700 7,700 7,700 7,700

619,702 313,665 290,691 272,406 229,532

21,085,115 21,356,065 22,112,184 22,656,952 22,848,848

EXPENSES Employees 7,510,296 8,127,297 8,612,734 9,105,336 9,322,072 Suppliers 8,454,080 9,155,541 9,438,038 9,626,302 9,914,375 Grants 18,000 11,556 1,575 1,594 1,629 Depreciation and amortisation 3,654,874 3,650,134 3,681,038 3,564,273 3,301,443 Finance costs 44,146 48,925 60,307 61,943 63,515 Write-down of assets and impairment of assets 1,948,141 361,670 317,570 296,571 244,870 Losses from sale of assets 2,152 – – – – Other expenses

Total expenses 54,815 942 922 933 944

21,686,504 21,356,065 22,112,184 22,656,952 22,848,848

Net surplus or (deficit) attributable to the Australian Government

-601,389 – – – –


100


Table 1.7.8—Budgeted departmental balance sheet

101

2007-08 2008-09 2009-10 2010-11 2011-12 Actual Revised Forward Forward Forward

Budget estimate estimate estimate

ASSETS $'000 $'000 $'000 $'000 $'000

Financial assets

Cash and cash equivalents 29,223 29,223 29,223 29,223 29,223 Appropriation Receivable 247,363 132,694 72,694 7,694 1,305 Other receivables 214,822 214,822 214,822 214,822 214,822

Total financial assets 491,408 376,739 316,739 251,739 245,350

Non-financial assets Land and buildings 12,568,074 13,169,827 13,758,006 14,525,955 15,318,673 Infrastructure, plant and equipment 5,857,848 5,773,973 5,643,163 5,548,251 5,425,459 Specialist Military Equipment 32,447,754 34,017,916 37,786,614 42,409,709 47,018,070 Intangibles 357,625 369,846 385,741 401,416 389,035 Heritage and cultural 805,587 805,587 805,587 805,587 805,587 Inventories 4,952,862 5,194,707 5,547,221 5,728,933 5,981,105 Prepayments

Total non-financial assets Assets held for sale

1,055,217 973,843 842,436 710,761 516,780 58,044,967 60,305,699 64,768,768 70,130,612 75,454,709

427,220 427,220 427,220 427,220 427,220 Total assets 58,963,595 61,109,658 65,512,727 70,809,571 76,127,279

LIABILITIES Payables

Suppliers 857,995 871,227 894,561 917,896 965,228 Other payables

Total Payables 197,170 197,170 197,170 197,170 197,170

1,055,165 1,068,397 1,091,731 1,115,066 1,162,398

Interest bearing liabilities Leases 404,988 863,370 822,633 781,182 739,519

Total interest bearing liabilities 404,988 863,370 822,633 781,182 739,519

Provisions Employees 1,856,704 1,985,056 2,126,128 2,347,705 2,612,005

Restoration, decontamination and decommissioning 615,572 615,572 615,572 615,572 615,572 Other provisions

Total provisions Total liabilities NET ASSETS EQUITY

24,603 24,603 24,603 24,603 24,603

2,496,879 2,625,232 2,766,304 2,987,880 3,252,181 3,957,032 4,556,998 4,680,667 4,884,128 5,154,098

55,006,563 56,552,660 60,832,060 65,925,443 70,973,181

Contributed equity 7,388,861 8,956,516 13,252,463 18,364,902 23,412,641 Reserves 12,834,121 12,834,121 12,834,121 12,834,121 12,834,121 Retained surpluses or accumulated deficits

Total equity Current assets

34,783,581 34,762,023 34,745,476 34,726,420 34,726,419 55,006,563 56,552,660 60,832,060 65,925,443 70,973,181 2,615,082 2,495,871 1,586,395 1,389,720 1,189,350

Non-current assets 56,348,513 58,613,787 63,926,332 69,419,851 74,937,929 Current liabilities 2,820,126 3,247,714 3,335,852 3,480,855 3,673,259 Non-current liabilities 1,136,906 1,309,284 1,344,816 1,403,273 1,480,838


Table 1.7.9—Budgeted departmental statement of cash flows



OPERATING ACTIVITIES $'000 $'000 $'000 $'000 $'000

Cash Received

Goods and Services 579,628 765,682 766,918 770,943 783,322 GST Receipts from Customers 17,034 18,655 19,206 19,774 20,357 Appropriations 19,659,706 20,231,213 20,993,282 21,544,757 21,758,383 GST Received from ATO 443,097 418,658 433,201 448,248 463,818 Other Cash Received 114,174 45,505 45,829 45,306 45,850 Cash transfer from the Official Public Account (receivables)

Total cash received 50,000 114,669 60,000 65,000 30,389

20,863,639 21,594,382 22,318,436 22,894,028 23,102,119

Cash Used Employees 7,248,681 7,819,037 8,312,367 8,681,925 9,030,606 Suppliers 7,733,976 7,991,960 8,385,235 8,300,310 8,701,836 GST payments 459,476 437,313 452,407 468,022 484,175 Grants 17,894 11,556 1,575 1,594 1,629 Other Cash Used 800 942 922 933 944

Total cash used Net cash from or (used by) operating activities

15,460,827 16,260,808 17,152,506 17,452,784 18,219,190

5,402,812 5,333,574 5,165,930 5,441,244 4,882,929

INVESTING ACTIVITIES Cash Received

Proceeds from sales of land and buildings 24,486 176,248 118,344 184,656 48,313 Proceeds from sales of infrastructure, plant and equipment 40,300 108,930 41,324 36,105 36,211 Proceeds from sales of specialist military equipment 2 – 1,238 329 276 Other cash received

Total cash received 595 – – – –

65,383 285,178 160,906 221,090 84,800

Cash used Purchase of land and buildings 608,490 678,139 1,134,249 1,358,506 1,163,986 Purchase of specialist military equipment 3,603,107 4,410,297 6,635,082 7,421,933 7,070,566 Purchase of infrastructure, plant and equipment 210,055 516,744 380,188 355,809 275,137 Purchase of intangibles 60,287 41,366 44,264 46,431 18,890 Purchase of inventory 1,446,140 1,430,178 1,317,447 1,476,070 1,387,973 Finance costs 15,193 48,925 60,307 61,943 63,515 Other cash used

Total cash used Net cash from or (used by) investing activities FINANCING ACTIVITIES

12,478 – – – –

5,955,750 7,125,649 9,571,537 10,720,692 9,980,067

-5,890,367 -6,840,471 -9,410,631 -10,499,602 -9,895,267

Cash received Appropriations - contributed equity

Total cash received 1,998,630 1,805,180 4,372,754 5,238,354 5,079,787 1,998,630 1,805,180 4,372,754 5,238,354 5,079,787

Cash Used

Repayment of debt 24,039 39,200 34,699 35,026 35,401 Cash to the Official Public Account [1]

Total cash used 1,490,897 259,083 93,354 144,970 32,048

1,514,936 298,283 128,053 179,996 67,449 67,449

102

Net cash from or (used by) financing activities Net increase (decrease) in cash and cash equivalents held

Cash and cash equivalents at beginning of reporting period Effect of exchange rate movements on cash at the beginning of the reporting period

Cash and cash equivalents at end of reporting period

483,694 1,506,897 4,244,701 5,058,358 5,012,338

-3,861 – – – –

32,007

1,077

29,223

–

29,223

–

29,223

–

29,223

–

29,223 29,223 29,223 29,223 29,223 Note 1. Return of proceeds from the sales of property, net of the cost of sales and drawdown from the Official Public Account.


Table 1.7.10—Departmental statement of changes in equity — summary of movement (Budget year 2008-09)

103

Accumulated Asset Contributed Total results revaluation

reserve equity/

capital Equity

Opening balance as at 1 July 2008 $'000 $'000 $'000 $'000

Balance carried forward from previous period Adjustment for changes in accounting policy

34,783,581 12,834,121 7,388,861 55,006,563

Adjusted opening balance

– – – –

34,783,581 12,834,121 7,388,861 55,006,563

Income and expense Asset revaluation movements

Sub-total income and expense recognised directly in equity

– – – –

– – – –

Net operating result – – – –

Total income and expenses attributable to the Australian Government Transactions with owners

– –

– –

Distribution to owners Returns of capital:

Restructuring – – – –Other -21,558 – -237,525 -259,083

Contributions by owners Appropriation (Equity Injection) – – 1,805,180 1,805,180

Other: Restructuring

Sub-total transaction with owners Transfers between equity components

– – – –-21,558 – 1,567,655 1,546,097

Estimated closing balance as at 30 June 2009

– – – –

34,762,023 12,834,121 8,956,516 56,552,660

Table 1.7.11—Departmental Capital Budget Statement


Budget estimate estimate estimate $'000 $'000 $'000 $'000 $'000

Purchase of land and buildings 608,490 678,139 1,134,249 1,358,506 1,163,986

Purchase of specialist military equipment 3,603,107 4,410,297 6,635,082 7,421,933 7,070,566

Purchase of infrastructure, plant and equipment 210,055 516,744 380,188 355,809 275,137

Purchase of intangibles 60,287 41,366 44,264 46,431 18,890

Total capital expenditure 4,481,939 5,646,546 8,193,783 9,182,679 8,528,579

FUNDED FROM:

Equity injection 524,315 1,805,180 4,372,754 5,238,354 5,079,787

Operating receipts 3,921,282 3,775,704 3,754,715 3,868,534 3,396,316

Net capital receipts 36,342 65,662 66,314 75,791 52,476

Total capital funding 4,481,939 5,646,546 8,193,783 9,182,679 8,528,579

CAPITAL RECEIPTS

Proceeds from the sale of land and buildings 13,868 176,248 118,344 184,656 48,313

Proceeds from the sale of infrastructure, plant and equipment [1] 39,056 108,930 41,324 36,105 36,211

Less: capital withdrawal

Net capital receipts

16,582 219,516 93,354 144,970 32,048

36,342 65,662 66,314 75,791 52,476


Note 1. Proceeds from sale of specialist military equipment is not included due to the cost of asset sales offsetting proceeds

received.

104

Table 1.7.12—Non-financial assets - summary of movement (Budget Year 2008-09)

Land and Buildings

Specialist Military

Equipment

Infrastructure Plant and Equipment

Intangibles Heritage and cultural

assets

Total

As at 1 July 2008

$'000

$'000

$'000 $'000 $'000 $'000

Gross book value 12,898,449 62,304,140 6,672,312 620,486 805,587 83,300,974 Accumulated depreciation 330,375 29,856,386 814,464 262,861 – 31,264,086 Opening net book value 12,568,074 32,447,754 5,857,848 357,625 805,587 52,036,888 Additions:

by purchase (current year) 678,139 4,410,297 516,744 41,366 – 5,646,546 by purchase (previous year's prepayment) – – – – – –

by finance lease 497,582 – – – –

497,582 Internally developed – – – – – –

Revaluations and impairment through equity – – – – – –Reclassifications – – – – – –Depreciation/amortisation expense 434,818 2,737,525 448,646 29,145 – 3,650,134 Writedowns and Impairments recognised in operating result – 350,267 11,403 – – 361,670 Other movements:

Change in accounting policy – – – – – – Other adjustments – – – – – –Transfers in (out) – – – – – – Transfers to Assets Held for Sale – – – – – –Reversal of previous asset write-down – 247,657 – – – 247,657

Disposals: from disposal of entities or other operations (including restructuring) 139,150 – 40,570 – – 279,720 other disposals – – – – – –

As at 30 June 2009 Gross book value 13,935,020 66,611,827 7,037,083 661,852 805,587 88,051,369 Accumulated depreciation 765,193 32,593,911 1,263,110 292,006 – 34,914,220 Estimated closing net book value 13,169,827 34,017,916 5,773,973 369,846 805,587 54,137,149


105

ANALYSIS OF ADMINISTERED ACTIVITY Administered expenses are those managed by Defence on behalf of the Government. They normally relate to activities governed by eligibility rules and conditions established by the Government or Parliament. Defence has three categories of administered expenses: military superannuation, housing assistance and other. These are described in further detail in Chapter Six – Planned Outcome Performance in output group 1.14.

Revised Administered Income and Expenses Defence is budgeting to receive $777.6m in income for administered items in 2008-09 and plans to have expenses of $2,964.9m. Details are shown in 1.7.13 and an explanation of the financial variations follow.

Table 1.7.13—Variation to budgeted income and expenses administered on behalf of Government

2008-09 Budget

estimate $'000


$'000 Variation

$'000

% INCOME administered on behalf of Government

60,448 13

Interest

41,187100

174 1,338.5 Dividends -19,348 -32.0 Military superannuation contributions 731,000 731,000 – – License fees 4,711 4,711 – – United Nations Reimbursements 569 569

-19,174

– – Total income administered on behalf of Government 7

523,300

2,638

96,741 77

23,30050,868

7,567 -2.4 EXPENSES administered on behalf of Government Subsidies -1,770 -3.4 Grants – –

Military retention benefits 42,000 42,000 – – Military superannuation benefits 2,848,700 2,848,700

-1,770

– – Total expenses administered on behalf of Government 2,966,638 2,964,868 -0.1


Income Income administered on behalf of the Government will decrease by $19.2m due to:

• an increase in interest from DHA ($0.2m)

• a decrease in dividends from DHA (-$19.3m).

Expenses Expenses administered on behalf of the Government will decrease by $1.8m due to:

• a decrease in subsidies in line with actuals (-$1.8m).

106

2008-09 SCHEDULE OF ADMINISTERED ACTIVITY

Table 1.7.14—Schedule of budgeted income and expenses administered on behalf of government


Budget estimate estimate estimate $'000 $'000 $'000 $'000 $'000

INCOME ADMINISTERED ON BEHALF OF

GOVERNMENT Revenue

Interest 124 187 13 13 13 Dividends 134,263 41,100 42,800 44,200 64,058 Military superannuation contributions 756,982 731,000 760,000 760,000 793,000 License fees – 4,711 12,775 20,681 26,672 Other 255 569 3 3 3

Total revenues administered on behalf of Government 891,624 777,567 815,591 824,897 883,746 EXPENSES ADMINISTERED ON BEHALF OF

GOVERNMENT Subsidies 11,284 50,868 69,354 88,324 106,177 Aircraft leasing costs 4,327 – – – – Grants 26,800 23,300 – – – Military retention benefits 31,405 42,000 40,000 38,000 36,000 Military superannuation benefits 2,818,000 2,848,700 2,946,890 3,047,100 3,150,300

Total expenses administered on behalf of Government 2,891,816 2,964,868 3,056,244 3,173,424 3,292,477


107

Table 1.7.15—Schedule of budgeted assets and liabilities administered on behalf of government



ASSETS ADMINISTERED ON BEHALF OF $'000 $'000 $'000 $'000 $'000

GOVERNMENT Financial assets

Cash and cash equivalents – – – – – Receivables 51,721 51,721 51,721 51,721 51,721 Investments 1,069,443 1,069,443 1,069,443 1,069,443 1,069,443

Total financial assets 1,121,164 1,121,164 1,121,164 1,121,164 1,121,164

Non-financial assets Prepayments

Total non-financial assets 85,506 85,506 85,506 85,506 85,506

85,506 85,506 85,506 85,506 85,506 Total assets administered on behalf of

Government 1,206,670 1,206,670 1,206,670 1,206,670 1,206,670

LIABILITIES ADMINISTERED ON BEHALF OF GOVERNMENT

Payables Other payables

Total Payables 25,242 25,242 25,242 25,242 25,242

25,242 25,242 25,242 25,242 25,242

Provisions Superannuation - DFRDB 22,917,000 23,050,400 23,124,900 23,169,300 23,180,700 Superannuation - MSBS

Total provisions Total liabilities administered on behalf of

10,705,000 11,823,200 13,027,500 14,311,000 15,683,600

33,622,000 34,873,600 36,152,400 37,480,300 38,864,300

Government 33,647,242 34,898,842 36,177,642 37,505,542 38,889,542


108

Table 1.7.16—Schedule of budgeted cash flows administered on behalf of government



OPERATING ACTIVITIES $'000 $'000 $'000 $'000 $'000

Cash Received

Interest 146 187 13 13 13Military superannuation contributions 790,924 731,569 760,003 760,003 793,003

License fee – 4,711 12,775 20,681 26,672Net GST received from ATO 175 – – – –Other 284 – – – –

Total operating cash received 791,529 736,467 772,791 780,697 819,688

Cash Used Military benefits 1,517,426 1,672,100 1,709,100 1,757,200 1,802,300Aircraft leasing costs 4,502 – – – –

Subsidies 12,200 50,868 69,354 88,324 106,177Grants 26,800 23,300 – – –

Total operating cash used Net cash from or (used by) operating activities

1,560,928 1,746,268 1,778,454 1,845,524 1,908,477

-769,399 -1,009,801 -1,005,663 -1,064,827 -1,088,789

INVESTING ACTIVITES Cash Received

Dividends 83,604 41,100 42,800 44,200 64,058Total investing cash received

Net cash from or (used by) investing activities Net increase (decrease) in cash held

Cash at the beginning of reporting period

83,604 41,100 42,800 44,200 64,058

83,604 41,100 42,800 44,200 64,058-685,795 -968,701 -962,863 -1,020,627 -1,024,731

39 – – – –Cash from the Official Public Account for appropriations 1,560,929 1,748,038 1,780,764 1,848,624 1,912,457Cash to the Official Public Account -875,173 -779,337 -817,901 -827,997 -887,726Effect of exchange rate movements on cash at the beginning of the reporting period

Cash at end of reporting period – – – – –– – – – –


109


NOTES TO THE BUDGETED FINANCIAL STATEMENTS

NOTE 1 – KEY ACCOUNTING POLICIES

1.1 Budgeted Financial Statements Overview Budgeted financial statements have been included to show the planned financial performance over the 2008-09 budget year, and each of the following forward years from 2009-10 to 2011-12.

The budgeted income statement, balance sheet, cash flow statement, capital budget statement, equity schedule and asset movement schedule are provided to show the revenues, expenses, assets, liabilities and equity of Defence. These budgeted statements contain estimates prepared in accordance with the requirements of the Government’s financial budgeting and reporting framework.

Budgeted financial estimates are provided for both departmental and administered financial items. Departmental, or controlled, financial items are revenues, expenses, assets and liabilities over which Defence has discretion, responsibility and authority. Departmental financial statements represent the financial performance of Defence in delivering its outputs.

Administered financial estimates include revenues, expenses, assets and liabilities that Defence administers on behalf of the Government, but over which Defence does not have management control.

1.2 Budgeted Departmental Financial Statements and Schedule of Budgeted Administered Activity Note that the term ‘budgeted financial statements’ and ‘statements’ are used interchangeably.

Under the Government’s accrual-based budgeting framework, and consistent with Australian Accounting Standards, transactions that agencies control (departmental transactions) are separately budgeted for and reported, compared to transactions that agencies do not have control over (administered transactions). This ensures that agencies are only held fully accountable for the transactions over which they have control.

• Departmental expenses include employee and supplier expenses and other administrative costs, which are incurred by Defence in providing its goods and services.

• Administered items are revenues, expenses, assets and liabilities that are managed by Defence on behalf of the Government according to set Government directions of which Defence does not have management control. These include military superannuation contributions, payments received from the United Nations and foreign governments, bank interest and dividends paid by Defence Housing Australia.

1.3 Appropriations in the Accrual Budgeting Framework Under the Government’s accrual budgeting framework, separate annual appropriations are provided for:

• departmental output appropriations (representing the Government’s funding for outputs from agencies)

• departmental capital appropriations (representing investments by the Government for either additional equity in or loans to agencies)

• administered expense appropriations (representing estimated administered expenses relating to an existing outcome, a new outcome or a Specific Purpose Payment to the states)

• administered capital appropriations (represent increases in administered equity through funding non-expense administered payments).

110


Special appropriations fund the majority of payments from the Consolidated Revenue Fund (especially those that are entitlement driven or involve transfers to state and territory governments).

1.4 Basis of Accounting The budgeted statements have been prepared in accordance with:

• Finance Minister’s Orders (FMOs), being the Financial Management and Accountability Orders (Financial Statements for reporting periods ending on or after 1 July 2007)

• Applicable Australian Accounting Standards and Interpretations issued by the Australian Accounting Standards Board (AASB).

The budgeted income statement and balance sheet have been prepared on an accrual basis and are in accordance with the historic cost convention, except for certain assets which, as noted (refer to items 1.12 and 1.14), are at fair value. Except where stated, no allowance is made for the effect of changing prices on the results or financial position.

Administered revenues, expenses, assets and liabilities and cash flows reported in the Schedules of Administered Activity are accounted for on the same basis and using the same policies as for departmental items, except as otherwise stated in Note 1.19.

1.5 Revenue

Revenues from the Australian Government Departmental outputs appropriation for the year are recognised as revenue, except for certain amounts which relate to activities that are reciprocal in nature, in which case revenue is recognised only when it has been earned.

Defence operates on a just in time draw-down basis that has resulted in undrawn appropriations at year end being reflected as a receivable. This receivable is available for draw-down to meet future obligations.

Other Revenue Revenue from the sale of goods is recognised upon delivery of the goods to the customer. Revenue is recognised from services at the time the service is provided. Revenue from disposal of non-current assets is recognised when control of the asset has passed to the buyer.

1.6 Transactions with the Australian Government

Equity Injection Equity injection represents an additional contribution to Defence by the Australian Government, which is over and above the revenue from the Government for the price of outputs. Equity injections are used to fund capital expenditure and are recognised directly into equity in that period.

Other Distributions to Owners including Return of Capital The Finance Minister’s Orders require that distributions to owners be debited to Contributed Equity, unless in the nature of a dividend.

1.7 Employee Benefits Defence’s workforce comprises two employment components: Australian Public Service (APS, i.e. civilians) and Australian Defence Force (ADF, i.e. military) personnel. Employee benefits for each workforce component are based on the relevant employment agreements and legislation.

Liabilities for services rendered by employees are recognised at the reporting date to the extent that they have not been settled.

111


Liabilities for wages and salaries (including non-monetary benefits) and annual leave expected to be settled within 12 months of the reporting date are measured at their nominal amounts. The nominal amount is calculated with regard to the rates expected to be paid on settlement of the liability. Employee benefits expected to be settled more than 12 months after the end of the reporting date are measured at the present value of the estimated future cash outflows to be made in respect of services provided by employees up to the reporting date.

Leave The liability for employee benefits includes provision for annual leave and long service leave. No provision has been made for sick leave as all sick leave is non-vesting and the average sick leave taken in future years by employees of Defence is estimated to be less than the annual entitlement for sick leave.

The leave liabilities are calculated on the basis of employees’ remuneration, including Defence’s employer superannuation contribution rates to the extent that the leave is likely to be taken during service rather than paid out on termination. Where there is a legal obligation to payment of leave within 12 months, even when payment is not expected, the liability is disclosed as current.

The liability for long service leave is determined by reference to the work of the Australian Government Actuary. The estimate of the present value of the liability takes into account attrition rates and pay increases through promotion and inflation.

The liability for annual leave for APS and ADF employees reflects the value of total annual leave entitlements of all such employees and is recognised at the nominal amount, or discounted to the present value for amounts not expected to be taken or paid within 12 months.

Superannuation on-costs have been added to the provisions for annual leave and long-service leave in respect of both APS and ADF employees.

Separation and Redundancy Provision is made for separation and redundancy benefit payments when Defence has developed a detailed formal plan for the terminations and has informed those affected that the terminations will be carried out.

Superannuation Permanently-appointed APS employees and Defence contribute to the Commonwealth Superannuation Scheme (CSS), the Public Sector Superannuation Scheme (PSS), the PSS Accumulation Plan (PSSAP) and other superannuation schemes held outside the Commonwealth. The CSS and PSS are defined benefit schemes for the Australian Government. The PSSAP is a defined contribution scheme.

The liability for defined benefits is recognised in the financial statements of the Australian Government and is settled by the Australian Government in due course. This liability is reported by the Department of Finance and Deregulation as an administered item.

Defence makes employer contributions to the Australian Government at rates determined by an actuary to be sufficient to meet the cost to the Government of the superannuation entitlements of the department’s employees. Defence accounts for these contributions as if they were contributions to defined contribution plans in accordance with AASB 119.

The Defence Force Retirement and Death Benefits Scheme (DFRDB) and the Military Superannuation and Benefits Scheme (MSBS) are defined benefit superannuation plans for ADF members. Defence accounts for these contributions in the Budgeted Departmental Statements as if they were contributions to defined contribution plans in accordance with AASB 119. The liability for DFRDB and MSBS is recognised in the Budgeted Schedules of Administered Activity.

112


1.8 Leases A distinction is made between finance leases and operating leases. Finance leases effectively transfer from the lessor to the lessee substantially all the risks and benefits incidental to ownership of leased non-current assets. In operating leases, the lessor effectively retains substantially all such risks and benefits.

Where a non-current asset is acquired by means of a finance lease, the asset is capitalised and recognised at the lower of the fair value of the leased asset and the present value of minimum lease payments at the commencement of the lease term. A liability is recognised at the same time for the same amount. Non-current assets acquired under a finance lease are depreciated/amortised over the useful life of the asset. Lease payments are allocated between the principal component and the interest expense.

Operating lease payments are expensed on a straight line basis over the term of the lease, which is representative of the pattern of benefits derived from the leased assets. Any contingent rent components of the lease are recognised as an expense in the period in which the amount of the increase/decrease is applied.

Lease incentives taking the form of ‘free’ leasehold improvements and rent holidays are recognised as liabilities. These liabilities are reduced by allocating lease payments between rental expense and reduction of liability.

1.9 Cash and Cash Equivalents Cash and Cash Equivalents means notes and coins held, as well as any deposits held at call with a bank or financial institution. Cash and Cash Equivalents are recognised at the nominal amount.

1.10 Receivables Receivables for goods and services, which have 30 day terms, are recognised at the nominal amounts due less any allowance for doubtful debt s. The collectability of receivables is assessed periodically with allowance made for doubtful debts when there is objective evidence that Defence will not be able to collect the debt. No allowance is made for Australian Government, foreign government and employee debts as they are deemed to be collectable unless there is objective evidence to the contrary.

1.11 Acquisition of Assets Assets are recorded at cost on acquisition except as stated below. The cost of acquisition includes the fair value of assets transferred in exchange and liabilities undertaken.

Assets acquired at no cost or for nominal consideration are initially recognised as as sets and revenues at their fair value as at the date of acquisition, unless acquired as a consequence of restructuring of administrative arrangements. In the latter case, assets are initially recognised as contributions by owners at the amounts at which they were recognised in the transferor agency’s accounts immediately prior to the restructuring.

1.12 Property, Plant and Equipment including Land, Buildings and Infrastructure

Asset Recognition Threshold Purchases of property, plant and equipment are recognised initially at cost in the Budgeted Balance Sheet where they meet the capitalisation threshold. The capitalisation thresholds for the classes of assets are detailed in the table below.

113


Table 1.7.17—Capitalisation Threshold for Various Asset Classes Asset Class Capitalisation

Threshold ($) Land 0.01 Buildings 5,000.00 Specialised military equipment (SME) including - SME in use; and 0.01 Repairable items Infrastructure 5,000.00 Heritage and cultural 5,000.00 Intangibles including – 150,000.00 Computer software – Purchased Computer software - Internally generated; and Other intangibles Other plant and equipment (OP&E) 2,000.00

Revaluations Land, buildings, plant and equipment are measured and disclosed at fair value. Valuations are conducted with sufficient frequency to ensure that the carrying values of assets do not materially differ from the assets fair value as at reporting date. The regularity of independent valuations depends upon the volatility of movements in market values for the relevant assets.

In accordance with the Finance Minister’s Orders, Specialist Military Equipment is carried at cost. Assets Under Construction are also not revalued but are carried at cost. In addition to reviewing expenditures from the point of rollout into service, Assets Under Construction expenditures are now also considered on a whole-of-life basis. They are subject to impairment testing annually and prior to being transferred into use.

Depreciation and Amortisation Non-current assets having limited useful lives are systematically depreciated/amortised over their estimated useful lives on a straight-line basis.

Heritage and cultural assets within Defence have been assessed to have indefinite lives. These heritage and cultural assets are stored, managed, displayed, repaired and restored in ways that will maintain their cultural or heritage value over time.

Depreciation and amortisation rates (useful lives) and methods are reviewed at each reporting date and necessary adjustments are recognised in the current, or current and future reporting periods, as appropriate. Residual values are re-estimated for a change in prices only when assets are revalued.

Decontamination and Restoration Costs Where a legal or constructive obligation arises on acquisition to restore an asset back to its original condition, the net present value of estimated restoration costs are capitalised and added to the cost of the underlying asset and depreciated over the asset’s useful life. A corresponding provision is recognised for the restoration obligation costs. When discounting is used, the carrying amount of the provision is adjusted to reflect the unwinding of the discount and this is recognised as a finance expense.

Where a legal or constructive obligation arises as a result of the operations of Defence (i.e. use of the assets) the present value of the costs of restoration is recognised as an expense in the period in which the obligation arises.

Asset Disposals The gain or loss on disposal of property, plant and equipment is determined as the difference between the carrying amount of the asset at the time of disposal and the proceeds of disposal, less any cost of disposal.

114


Impairment of Non-Current Assets Non-current assets carried at cost or fair value are assessed annually for indications of impairment. Where indications of impairment exist, the recoverable amount of the asset is estimated and compared to the asset’s carrying amount. If the recoverable amount is less than its carrying amount, the carrying amount is reduced to the recoverable amount and the reduction is to be shown as an impairment loss expense.

1.13 Inventory Defence's inventory is for its own consumption and it does not ordinarily hold inventory for sale. If sales are made they represent disposal of inventory surplus to requirements and minor fuel sales.

Inventory held for distribution is measured at cost, adjusted where applicable for loss of service potential.

Defence has implemented a policy to identify and provide for potential excess stocks.

Costs incurred in bringing each item of inventory (primarily explosive ordnance and general stores) to its present location and condition that are capable of being allocated on a reasonable basis are assigned to inventory. The costs of inventories are assigned by using the weighted average cost formula.

1.14 Intangibles Defence’s intangibles primarily comprise externally acquired and internally-developed computer software for internal use. Intangibles with gross values greater than $150,000 are capitalised.

Acquired intellectual property may form part of the acquisition of particular tangible assets and in such cases is reflected in the value reported for the relevant non financial asset class within the Budgeted Balance Sheet.

Defence carries intangible assets at cost or, where an active market exists, at fair value less any subsequent accumulated amortisation and accumulated impairment losses.

The service potential of non-current intangible assets is reviewed annually. If an intangible asset is regarded as being impaired, the asset is written down to reflect its remaining service potential.

Intangibles are amortised on a straight-line basis over their anticipated useful life.

1.15 Investments Investments held on behalf of the Australian Government are included as administered assets and are brought to account at the value of the Australian Government’s share of the net assets of the entity. This is a requirement of the Finance Ministers’ Orders. Administered investments in controlled entities are not consolidated because their consolidation is relevant only at the whole-of-government level.

1.16 Foreign Currency Transactions denominated in a foreign currency are converted at the exchange rate on the date of transaction. Foreign currency receivables and payables are translated at the exchange rate current as at the balance date. Exchange gains and losses are brought to account in determining the operating result for the year.

115


1.17 Taxation Defence’s activities are exempt from all forms of taxation except fringe benefits tax, the goods and services tax (GST), and certain excise and customs duties.

Revenues, expenses and assets are recognised net of GST except:

• where the amount of GST incurred is not recoverable from the Australian Taxation Office

• for receivables and payables (which are shown inclusive of GST in the Budgeted Balance Sheet).

1.18 Insurance Defence has insured for key insurable risks, excluding workers compensation, through the Government’s insurable risk managed fund, called ‘Comcover’. Workers compensation is through Comcare.

1.19 Schedules of Budgeted Administered Activity Administered revenues, expenses, assets, liabilities and cash flows are disclosed in the Schedules of Administered Activity.

Except where otherwise stated below, administered items are accounted for on the same basis and using the same policies as for departmental items, including the application Australian Accounting Standards and Interpretations issued by the AASB.

Revenue collected by Defence, for use by the Australian Government rather than Defence, is Administered Revenue. Collections are transferred to the Official Public Account maintained by the Department of Finance and Deregulation. Conversely, cash is drawn down from the Official Public Account to make payments under parliamentary appropriations on behalf of the Australian Government. These transfers to and from the Official Public Account are reported as adjustments to the administered cash held by Defence on behalf of the Government and reported as such in the Budgeted Statement of Cash Flows in the Schedule of Administered Activity. Thus the Budgeted Schedules of Administered Activity largely reflect the Australian Government’s transactions, through Defence, with parties outside the Australian Government.

Administered Revenue All administered revenues relate to activities performed by Defence on behalf of the Australian Government. Administered revenues mainly comprise military superannuation contributions, payments received from the United Nations and foreign governments, bank interest and dividends paid by Defence Housing Australia.

Administered Expenses All administered expenses relate to activities performed by Defence on behalf of the Australian Government. Administered expenses mainly comprise unfunded military superannuation benefits, ADF housing subsidies and ADF retention benefits.

Administered Investments Defence reports the Australian Government’s capital investment in Defence Housing Australia. The investment is classified as ‘available for sale’ and is measured at fair value using the net assets valuation approach in accordance with the FMOs. The investment is subject to impairment testing.

Military Retention Benefits Certain categories of ADF personnel who are members of the Military Superannuation and Benefits Scheme and have had 15-years of service receive retention benefits as an incentive for continued service. Retention benefit payments are initially recorded as prepayments and written down over the period of service.

116


Military Superannuation The Defence Force Retirement and Death Benefits Scheme (DFRDB) and the Military Superannuation Benefits Scheme (MSBS) are defined benefit superannuation plans for ADF members. Contributions, benefit payments and the provision for unfunded obligations are reflected in the Budgeted Schedules of Administered Activity.

The DFRDB is a fully unfunded scheme but the MSBS is a partly-funded scheme. MSBS member contributions are paid into the MSBS fund that is controlled by the MSBS Board and are therefore not reflected in the Budgeted Schedules of Administered Activity. The Australian Government on behalf of the MSBS Fund makes funded benefit payments to members of the scheme and the Australian Government is reimbursed by the MSBS fund for these payments.

The Australian Government Actuary estimates the unfunded provisions and expected future cash flows as at 30 June each year. These estimates are reflected in the Budgeted Schedules of Administered Activity. The Australian Government Actuary completes a full review of the unfunded liabilities (a long-term cost report) every three years.

117

PART TWO

DEFENCE MATERIEL ORGANISATION

SECTION ONE

DEFENCE MATERIEL ORGANISATION OVERVIEW AND RESOURCES

CHAPTER ONE — DEFENCE MATERIEL ORGANISATION

OVERVIEW

OVERVIEW



Part Two – Defence Materiel Organisation

OVERVIEW

The DMO’s mission is to equip and sustain the Australian Defence Force (ADF). The DMO is currently managing over 215 major projects, over 180 minor projects and 99 sustainment schedules, across more than 40 locations in Australia and overseas.

OVERVIEW OF THE 2008—09 ADDITIONAL ESTIMATES

The 2008-09 DMO revised estimates are around $9.7b in departmental funding. This is approximately $0.1b higher than the funding estimated at the 2008-09 Budget mainly as a consequence of increase in sustainment activity ($0.1b), movement of foreign exchange rate ($0.5b) and reprogramming of cash flow requirements (-$0.5b).

Strategic priorities for 2008—09 Results will be reported in the Defence Annual Report 2008-09, Volume 2.

Defence Procurement and Sustainment Review The Review was completed in September and the Minister for Defence, the Hon Joel Fitzgibbon MP, tabled the Review report, entitled Going to the Next Level, in Parliament on 23 September 2008.

The Review concluded that the Kinnaird recommendations have been very successful in improving the system but more work needs to be done. The Review made 46 recommendations across five areas:

• The Strategy and Needs Analysis of Capability Planning

• Defining the Requirements of Capability

• The Capability Acquisition Process

• Sustaining and Disposing of Capability

• Driving Cultural Change in the DMO.

The Government is currently considering its response to the Review.


Senior Executive changes Ms Gillian Marks, General Counsel, concluded her tenure with the DMO on 31 October 2008.

125

Figure 2.1.1 – The DMO organisational structure as at 2 December 2008

Chief Executive Officer Dr S Gumley

General Manager Programs and AWD

Mr W King ***

General Manager Systems

Mr K Gillis ***

Industry Division Mr K Clarke

**

Special Counsel to CEO DMO

Mr H Dunstall **

Maritime Systems RADM B Robinson

**

Land Systems Mr C Sharp

**

Human Resources and Corporate Services

Mr P Lambert **

New Air Combat Capability

AVM J Harvey **

Airborne Early Warning and Control

AVM C Deeble **

Aerospace Systems AVM C Rossiter

**

Electronic Systems Ms S McKinnie

**

Helicopter Systems MAJGEN T Fraser

**

Explosive Ordnance Mr A Klenthis

**

Chief Finance Officer DMO

Mr S Wearn **

Major Programs Systems Corporate

Stars refer to Australian Defence Force Star Rank or SES Band Levels

Defence Export Unit Mr T Whelan

*

Super Hornets AIRCDRE A Augustin

*

Amphibious Ships Mr P Brown

*

Overlander BRIG D O’Brien

*

General Manager Corporate Ms J Wolfe

***


126

CHAPTER TWO — DEFENCE MATERIEL ORGANISATION

RESOURCING

RESOURCING FOR 2008-09

RESOURCING FOR 2008–09 Agency resource statement The Agency Resource Statement details the resourcing for the DMO at Additional Estimates. Table 2.2.1 outlines the total resourcing available from all sources for the 2008-09 Budget year, including variations through Appropriation Bills No.3 and special accounts.

Table 2.2.1—DMO resource statement — Additional Estimates for 2008-09 as at Additional Estimates December 2008

Estimates at Proposed

Additional Total Estimate at Additional Total Available

Budget Estimates Estimates Appropriation2008-09 2008-09 2008-09 2007-08

$'000 $'000 $'000 $'000

Ordinary Annual Services

Outcome 1[1] 94,960 - 94,960 93,256

s31 Relevant agency receipts[2] - - - -

Total ordinary annual services A 94,960 - 94,960 93,256

Total other services B - - -

Total Available Annual

Appropriations (A+B) 94,960 - 94,960 93,256

Total Special Appropriations C - - -

Total Appropriations excluding

Special Accounts 94,960 - 94,960 93,256

Special Accounts

Opening balance[3] 978,530 9,332 987,862 564,819

Appropriation Receipts 94,960 - 94,960 93,256

Appropriation Receipts - other agencies[4] 9,418,881 -47,982 9,370,899 9,201,828

Non-Appropriation receipts to

Special Accounts 82,507 5,971 88,478 101,562

Total Special Account D 10,574,878 -32,679 10,542,199 9,961,465

Total resourcing

A+B+C+D 10,669,838 -32,679 10,637,159 10,054,721

Less appropriations drawn from -94,960 - -94,960 -93,256

annual or special appropriations above

and credited to special accounts

Total net resourcing for DMO 10,574,878 -32,679 10,542,199 9,961,465


Notes 1. Appropriation Bill (No.1) 2008-09. 2. Total s31 Relevant Agency receipts – estimate. 3. Estimated opening balance for special accounts. For further information on special accounts see Table 2.6.1. 4. Appropriation receipts from Defence annual and special appropriations for 2008-09 included above.

Reader note: All figures are GST exclusive.

129


Table 2.2.2—Third party drawdowns from and on behalf of other agencies Estimate at

Estimate at Additional Budget 2008-09

Estimates 2008-09

$'000 $'000 Payments made to other agencies for the provision of services 318,105 328,744

Table 2.2.3—Prior year Annual Appropriations Carried Forward and Special Account Opening Balances finalised in Agency Annual Report

Estimate $'000

Actual $'000

Total Adjustment $'000

Departmental outputs - ordinary annual services 93,256 93,256 -Departmental - non- operating - equity injections - - -Special account opening balances 978,530 987,862 9,332

Additional Estimates and Variations Table 2.2.4 details the changes to the resourcing for the DMO at Additional Estimates, by outcome. It details Additional Estimates or variations through other factors, such as indexation adjustments.

Table 2.2.4—Additional Estimates and variations to outcomes from other variations Output

Impacted 2008-09

$'000 2009-10

$'000 2010-11

$'000 2011-12

$'000

Outcome 1 Decrease in estimates (departmental) Indexation adjustments 1.3 - -647 -629 -1,557

Net impact on estimates for Outcome 1 (departmental) - -647 -629 -1,557

130


Breakdown of Additional Estimates by Appropriation Bill Table 2.2.5 details the Additional Estimates sought for the DMO through Appropriation Bills No.3.

Table 2.2.5—Appropriation Bill (No. 3) 2008-09 2007-08 2008-09 2008-09 Additional Reduced

Available $'000[1]

Budget $'000

revised $'000

estimates $'000

estimates $'000

DEPARTMENTAL OUTPUTS Outcome 1

Defence capabilities are supported through efficient and effective acquisition and through-life support of materiel 93,256 94,960 94,960 - -Total 93,256 94,960 94,960 - -

Notes 1. 2007-08 available appropriation included to allow a comparison of this year's appropriation with what was made available

for use in the previous year.

Reader Note: Available appropriation is the amount available to be drawn down, and is equal to: Budget Appropriation + Additional Estimates Appropriation + Advance from the Finance Minister – Savings Rephasings - Other Reductions +/- Section 32

131

CHAPTER THREE — MANAGEMENT REFORMS AND GOVERNANCE

GOVERNING THE DMO

Chapter Three – Management reforms and governance

Information remains as reported in the Defence Portfolio Budget Statements 2008-09 except for the following information.

Vision The DMO’s vision is to become the premier program management, logistics and engineering services organisation in Australia.

GOVERNING THE DMO A new Ministerial Directive was signed by the Minister for Defence, the Hon Joel Fitzgibbon MP on 28 July 2008.

The Ministerial Directive provides a mechanism to define the relationship between the Minister and the CEO DMO.

135

CHAPTER FOUR — DEFENCE MATERIEL ORGANISATION PEOPLE

DMO PEOPLE

DMO PEOPLE

Approved increases in the DMO workforce positions have resulted in a revised estimate of 7,658. Variation to the DMO and Defence workforce numbers as shown in Table 2.4.1. The ADF workforce numbers are also included in the Defence People Chapter in Part One.

Table 2.4.1—Breakdown of personnel numbers by service and rank / level [1]

Budget Estimate

Revised Estimate

2008-09 2008-09 Variation Variation % APS [2]

Senior Executives [3] 35 35 0 0 Senior Officers [4] 1,405 1,444 39 3 Other APS Staff 3,935 3,911 -24 -1 Sub-total : APS [5] 5,375 5,390 15 0 Professional Service Provider (PSP) [6] 255 267 12 5 Sub-total civilian workforce 5,630 5,657 27 0

NAVY Star Ranked Officers 8 8 0 0 Senior Officers [4] 51 51 0 0 Junior Officers 138 135 -3 -2 Other Ranks 156 155 -1 -1

Sub-total : Permanent Navy Reserve Force[7]

353 140

349 140

-4 0

-1 0

Sub-total Navy 493 489 -4 -1 ARMY

Star Ranked Officers 6 6 0 0 Senior Officers [4] 54 54 0 0 Junior Officers 200 201 1 1 Other Ranks 211 210 -1 0

Sub-total : Permanent Army Reserve Force[7]

471 70

471 70

0 0

0 0

Sub-total Army 541 541 0 0 AIR FORCE Star Ranked Officers 9 9 0 0 Senior Officers[4] 91 95 4 4 Junior Officers 466 466 0 0 Other Ranks 369 366 -3 -1 Sub-total : Permanent Air Force 935 936 1 0 Reserve Force[7] 35 35 0 0 Sub-total Air Force 970 971 1 0

Sub-total ADF permanent workforce 1,759 1,756 -3 0 Expected ADF Shortfalls 0 0 0 0

Sub-total permanent ADF workforce 1,759 1,756 -3 0 Sub-total ADF Reserves Force 245 245 0 0 Total DMO Workforce 7,634 7,658 24 0


Notes 1. Reflects the APS, PSP, ADF permanent and reserve forces for 2008–09. Numbers for the Permanent Forces includes

Reservists undertaking Continuous Full Time Service. 2. Includes 15 Full Time Equivalent for unapproved projects. 3. The figures for Senior Executive Service include CEO-DMO and General Managers. 4. Senior Officers are of Colonel or Lieutenant Colonel rank equivalent and substantive APS Executive Level 1 and 2. 5. These figures include the 5 per cent efficiency savings. 6. PSPs are individuals with specialist skills under contract to fill line positions. 7. ADF Reserve figures represent numbers of active Reservists (excluding Reservists undertaking full-time service and

Foreign Service Reservists) who rendered service during 2008-09 and additional DMO ADF Reservist bids for 2008-09.

139

SECTION TWO

DEFENCE MATERIEL ORGANISATION OUTCOMES AND PLANNED PERFORMANCE

CHAPTER FIVE — PLANNED OUTCOME AND PERFORMANCE

OUTCOME AND PERFORMANCE INFORMATION

SUMMARY OF OUTCOME AND CONTRIBUTION TO OUTCOME

PERFORMANCE AND EVALUATION INFORMATION FOR THE DMO OUTCOME

OUTPUT 1.1 - MANAGEMENT OF CAPABILITY ACQUISITION

OUTPUT 1.2 – MANAGEMENT OF CAPABILITY SUSTAINMENT

OUTPUT 1.3 – PROVISION OF POLICY ADVICE AND MANAGEMENT SERVICES


OUTCOME AND PERFORMANCE INFORMATION

Performance information is as reported in the Portfolio Budget Statements 2008-09, except for the revisions detailed in this chapter.

The total price of outputs estimates have primarily increased to reflect movement of exchange rate, increase in sustainment activities and reprogramming of cash flow for major projects estimates to future years.

SUMMARY OF OUTCOME AND CONTRIBUTION TO OUTCOME

The relationship between activities of the DMO and its outcome is summarised in Figure 2.5.1 in terms of accrual-based prices rather than cash received from Defence and the Government. Prices have been updated in accordance with the revised estimates.

Figure 2.5.1—Contributions to outcome and outputs

Defence Materiel Organisation

Total Price of Outputs: $9,744.062m (2008-09 PBS: $9,647.336m)

Total Departmental outcome appropriation: $94.960m (2008-09 PBS: $94.960m)

Administered Appropriation: Nil

Outcome 1 Defence capabilities are supported through efficient and effective acquisition and through-life support of materiel

Total price: $9,744.062m (2008-09 PBS: $9,647.336m)

(Total Departmental outcome appropriation: $94.960m) (2008-09 PBS: $94.960m)

Administered Appropriation: Nil

Output 1.1 Management of Capability

Acquisition


Output 1.2 Management of Capability

Sustainment


Output 1.3 Provision of Policy Advice and

Management Services

Total price: $103.015m (2008-09 PBS: $102.804m)

Department output appropriation: $94.960m

(2008-09 PBS: $94.960m)

145


PERFORMANCE AND EVALUATION INFORMATION FOR THE DMO OUTCOME

Information remains as reported in the Defence Portfolio Budget Statements 2008-09.

Output 1.1—Management of capability acquisition Separate Materiel Acquisition Agreements between the Defence customer and the CEO DMO covers each capability project. Each agreement specifies the project in terms of the scope to be delivered, the schedule for delivery, and the budget that is available. The scope description is a reference to underlying capability specifications and key measures of capability effectiveness as selected by the customer. The schedule description outlines key milestones. The budget information provides current estimates against programmed expenditure.

The revised planned resource use for Output 1.1 is $4,523.7m in 2008-09, a decrease of $154.2m from the 2008-09 budget estimate. Planned resources include $188.1m of currently unapproved major capital projects. The transfer to the DMO of these funds will be subject to Defence obtaining project approval during 2008-09.

Australian defence industry involvement in major capital equipment projects will be reported as an appendix in the Defence Annual Report 2008–09.

APPROVED MAJOR CAPITAL EQUIPMENT PROJECTS

The DMO is currently managing over 215 major projects. A major capital equipment project is defined as a project with strategic importance and is part of the Defence Capability Plan.

TOP 30 PROJECTS BY 2008-09 FORECAST EXPENDITURE

Table 2.5.1 lists the top 30 Government approved projects by forecast expenditure for 2008-09. Schedules for delivery of the capability are included in the descriptions of the Top 30 projects.

146

Table 2.5.1—Top 30 acquisition projects by forecast expenditure in 2008-09

Project Number

Approved Projec t Expenditure

$m


30 June 2008 $m

Budget Estimate 2008-09

$m

Revised Estimate 2008-09[1]

$m Variation

$m Explanation of Variation[2]

Aerospace Systems Division

AP-3C Electronic Support Measure Upgrade

AIR 5276 Phase 8B

127 15 30 17 -13

Contractor workforce and facilities constraints associated with resources shared by Airborne Early Warning & Control has created some initial schedule slippage. These constraints have been addressed and the schedule rebaselined. The rebaselining also reflects the opportunit y provided by BAE Systems acquisition of Tenix Defence to combine

equipment delivery with aircraft integration allowing the latter to be commenced later than previousl y planned. The decrease in expenditure is due to reprogramming milestone payments from 2008-09 to 2011-12 and 2012-13.

F/A-18 Hornet Upgrade AIR 5376 Phase 2

1,983 1,258 125 95 -30

Foreign Military Sales (FMS) deliveries for Hornet Upgrade Phase 2 are on schedule. 2008-09 budget estimates programmed FMS payments of $43m have been made on delivery of supplies in advance of USN disbursements. As a result, the FMS case is now paid in advance requiring reduced expenditure in 2008-09.

F/A-18 Hornet Upgrade – Structural Refurbishment

AIR 5376 Phase 3.2

919 164 100 83 -17

Planned expenditure for 2008-09 has been reduced by $4m on account of work completed, ahead of schedule, in the previous year. The remaining variance for 2008-09 plan is attributed to work associated with the Centre Barrel Replacement (CBR) program, where costs are no w better defined and are now expected to be completed at prices less than

those previously estimated. Secondly, the reduction in planned expenditure is also attributed to the reduction in aircraft requiring CBR. With no further aircraft planned to be inducted for CBR after December 2008, this translates to reduced expenditure in the second half of 2008-09.

ADF Air to Air Refueling Capability AIR 5402 1,997 560 260 315 55 Variation attributable to global update.

Maritime Patrol and Response Aircraft System

AIR 7000 Phase 2

155 0 51 21 -30

Commencement of collaboration with the USN on Spiral 1 of its Multi Mission Maritime Aircraft (MMA) program has slipped because of delays in the USN program. The Spiral 1 program and project planning has no w matured to enable finalisation of the MoU, including rephasing of the MoU fee over a number of years to provide better value for money.

Airborne Surveillance for Land Operations

JP 129 Phase 2

147 7 25 29 4 Variation attributable to global update.

C-17 Globemaster III AIR 8000 Phase 3

1,974 1,296 23 22 -1 Variation attributable to global update.


ProjectNumber

Approved ProjectExpenditure

$m


30 June 2008 $m


$m


$m Variation


Airborne Early Warning and Control Program – Project

Wedgetail

Airborne Early Warning and Control Aircraft

AIR 5077 Phase 3

3,999 2,511 68 38 -30 Decrease primarily driven by further slippage in the System Acquisition Contract schedule, offset by a number of minor variances in other project cost elements.

Air Warfare Destroyer Program

Air Warfare Destroyer – Build SEA 4000 Phase 3

7,872 441 600 694 94 The revised estimate increase is due to the latest exchange and global

up date process. There has been no other change to the previously submitted PBS data.

Bridging Air Combat Capability—Super Hornet

Bridging Air Combat Capability Super Hornet

AIR 5349 Phase 1

3,915 341 564 560 -4

While the revised 2008-09 forecast is a minor variation from previous estimates, it represents the aggregation of large variations in planned expenditure. Estimates for 2008-09 were increased by $127m due to a declining exchange rate, but were offset by a higher than planned achievement in 2007-08 (-$129m) and minor re-programming (-$2m). The higher than anticipated FMS payment of $129m in June 2008 was the result of USN efforts focused to award production contracts ahead of schedule. The project remains on-schedule to deliver aircraft in 2010.

Electronic Systems Division New Air Defence Command and Control Systems for Control and Reporting Units 2 & 3 (2CRU/3CRU)

AIR 5333 272 114 27 30 3 Minor adjustments within the various components of the project including the Prime Contract, work being carried out Defence, and work being carried out by other contractors.

Electronic Warfare Self Protection for Selected ADF Aircraft – Echidna

AIR 5416 Phase 2

314 175 67 52 -15

Milestone payments against the ALR-2002 Full Rate Production contract occurred in 2007-08. The Black Hawk simulator upgrade has been

aligned to the Interim Electronic Warfare Self Protection configuration now scheduled for 2009-10, slippage of software development and delay

with the induction of the prototype aircraft have also occurred.

Next Generation Satellite Program

JP 2008 Phase 4

1,000 18 79 61 -18 Reduced expenditure reflects revised financial milestones for Australia’s contribution to the Wideband Global Satellite program.

High Frequency Modernisation (HFMOD)

JP 2043 Phase 3A

652 361 28 7 -21 Revised estimate is the result of schedule delays by the prime contractor in completing integration and test activities.

ProjectNumber


$m


30 June 2008 $m


$m


$m Variation


Explosive Ordnance Division

Follow-on Stand-Off Weapon AIR 5418 Phase 1

413 105 50 47 -3 The variation is principally due to a combination of FMS payments made in 2007-08, previously planned for payment in 2008-09, and exchange rate variations associated with USD payments.

Lightweight Torpedo Replacement

JP 2070 Phase 3

317 94 52 48 -4

This variation relates to slippage of a significant contract milestone. This resulted from a delay in securing some items from subcontractors, which

ultimately impacted on delivery of the items to Australia. These will now be delivered into Australia in 2009-10, but this delay will not impact the achievement of the Phase 3 schedule.

Explosive Ordnance Reserve Stocks

JP 2085 Phase 1B

214 147 33 26 -7 The variation is due to delays in finalising the FMS case and previously

planned payments for Excalibur Precision Guided Munitions slipped to 2009-10.

Mulwala Redevelopment Project JP 2086 Phase 1

367 56 171 144 -27

Expenditure has been reprogrammed from 2008-09 to 2009-10 due to an 8-12 week delay in design and construction activities resulting from the

contractor's inability to recruit for design activities, and a delay encountered by the contractor in gaining State Government planning approvals.

Helicopter Systems Division

Armed Reconnaissance Helicopter

AIR 87 Phase 2

2,078 1,310 172 125 -47 Variation is due to the revised payment regime and Integrated Master Schedule developed from the Deed of Agreement and subsequent contract changes resolving the disputed issues with the contractor.

Multi Role Helicopter AIR 9000 Phase 2

3,997 818 273 298 25 The forecast $25m increase in expenditure is due to updated economic parameters being applied to the project plan.

Land Systems Division Upgrade of M-113 Armoured Vehicles LAND 106 649 317 100 105 5 Variation attributable to global update.

Bushmaster Infantry Mobility Vehicle Project Bushranger

LAND 116 Phase 3

916 392 82 85 3 Variation attributable to global update.

Maritime Systems Division

Guided Missile Frigate Upgrade Implementation

SEA 1390 Phase 2

1,526 1,172 118 109 -9 Variation is due to prime contractor work being ahead of schedule and payments in 2007-08, and corrections for the FMS Case related to Additional Ship Crew Training.

Standard Missile Replacement (SM-1)

SEA 1390 Phase 4B

625 181 79 62 -17 The reduction in planned expenditure is due to cost savings in the procurement of missiles.


ProjectNumber

SEA 1429 Phase 2


$m

457


30 June 2008 $m

216


$m

26


$m

32

Variation $m

6

Explanation of Variation[2]

The variation is due to the purchase of additional torpedoes for trial purposes brought forward from future years. New Heavyweight Torpedo

Collins class Submarine Reliability & Sustainability

SEA 1439 Phase 3

402 243 42 39 -3 The variation reflects the diversion of the contractor resources to other higher schedule priorities, and scheduling opportunities for dockings.

Amphibious Deployment and Sustainment Program

Amphibious Deployment and Sustainment

JP 2048 Phase 4A/4B

3,361 244 132 142 10 Variation attributable to global update.

Military Integrated Logistics Information System

Improvements to the Logistics Information Systems

JP 2077 Phase 2B.1

128 69 30 25 -5 Delivery and payment schedule was revised and agreed in June 2008 to provide for milestone payments and for some payments to be deferred until after the successful launch of the system.

ADF Deployable Logistics Systems

JP 2077 Phase 2B.2

93 4 27 5 -22 Contract negotiations were postponed in December 2007 pending successful delivery by the vendor of Phase 2B.1 software tranches. Contract negotiations now expected first half of 2009.


Detailed Analysis and Acquisition Planning

AIR 6000 Phase 1B

107 30 40 44 4 Variation is the result of contracted activities slipping into the first quarter of 2008-09, foreign exchange adjustments and additional tasking to be undertaken in 2008-09 not previously programmed.

TOTAL ESTIMATE 40,976 12,659 3,474 3,360 -114

Other Approved Project Estimate 34,439 26,856 825 845

Total Program Estimate for Major Capital Projects 75,415 39,515 4,299 4,205

Management Margin -338 -225

Estimated Outturn from existing Major Capital Projects

3,961 3,980

Projects Planned for Government Consideration

278 188

Notes 1. PAES update is based on supplementation for exchange rate movements of $442m and new project approved and other adjustments following the MYEFO/PAES review of $19m. 2. The revised estimate 2008-09 will include economic parameter adjustments for price update and foreign exchange calculation, referred to in explanations as the Global Update.


TOP 30 PROJECT DESCRIPTIONS

Information relating to the following projects remains as reported in the Defence Portfolio Budget Statements 2008-09:

• Lightweight Torpedo Replacement-JP 2070 Phase 3

• Improvements to the Logistics Information System-JP 2077 Phase 2B.1

• ADF Deployable Logistics Scheme-JP 2077 Phase 2B.2.

UPDATED INFORMATION ON TOP 30 PROJECTS

Information remains as reported in the Defence Portfolio Budget Statements 2008-09, except for the following:


AP-3C Electronic Support Measure Upgrade—AIR 5276 Phase 8B Contractor: BAE Systems Australia Limited.

At contract award, the Initial Operating Capability (IOC), including modification of four AP-3C aircraft, the Operational Mission Simulator, Software Support Facility and Part Task Trainers, was planned for August 2011.

BAE have had to divert technical resources from this project to manage technical and performance issues on the Electronic Support Measures on the AEW&C project for which they are a sub-contractor to Boeing. The project is also reliant on some deliverables from the AEW&C project. This has resulted in a revised IOC of August 2012.

F/A-18 Hornet Upgrade—AIR 5376 Phase 2 Contractor:

• The Boeing Company (United States) – for Avionics Upgrade

• The Boeing Company (United States) – for Electronic Warfare Self Protection Suite Aircraft Technical Integration

• United States Navy – for Aircraft Software Integration and Radar Warning Receiver Acquisition

• SAAB (Sweden) – for Supplementary Counter Measures Dispensing Systems

• Elta (Israel) – for Active Radio Frequency Electronic Counter Measures Systems

• Raytheon Australia – for Simulator Upgrade.

The acquisition contract for the Electronic Counter-Measures Jammer was signed in May 2008 and the acquisition contract for Supplementary Counter-Measures Dispensing System in July 2008. The Interim Electronic Warfare capability, which introduces the replacement Radar Warning Receiver into service, is on schedule for completion by the end of 2008. The full-rate, mature, electronic warfare aircraft modification program is expected to commence in mid 2009, following the release of a Request for Tender in September 2008. Tender responses due to be submitted by December 2008.

The new Tactical Operation Flight Trainers (simulators) are operational, with ongoing enhancements planned to keep pace with the aircraft modifications being introduced under the Phase 2 project.

151


F/A-18 Hornet Upgrade—Structural Refurbishment—AIR 5376 Phase 3.2 Contractor:

• L-3 Communications MAS Inc (Canada) for the Centre Barrel Replacement program, which includes Non-Recurring Engineering/Modification and Production Installation

• Boeing Australia Ltd – for Structural Refurbishment Program 1 Delta Production Installation (Contract Expires 30 November 2008)

• BAE Systems Australia – for Structural Refurbishment Program 1 Delta Production Installation (Contract Expires 30 November 2008)

• Interim contracting arrangements will be in use until mid 2009, when a new contract is planned to be in place to conduct Structural Refurbishment Program 1 Delta Production Installation.

In May 2008 an engineering study was completed that showed the fatigue life of the Centre Barrel could be extended beyond the current limits, resulting in a reduction in the number of aircraft requiring Centre Barrel Replacement (CBR). The DMO and Capability Development Group has re-scoped the project to reduce the number of CBR to 10, but also to introduce new structural refurbishment work to address several emerging ageing aircraft issues such as corrosion in undercarriages, wings and other structural locations.

A total of 10 CBR (including two prototypes) have been contracted to L–3 Communications MAS (Canada).

The first CBR prototype aircraft is complete and has returned to service. The second prototype is undergoing rebuild at BAE Systems Australia in Williamtown, NSW under sub-contract to L–3 Communications MAS (Canada). Production has commenced on a further six aircraft with the last two aircraft to be commenced in December 2008.

Structural Refurbishment Program 1 Delta Production Installation is continuing, with 16 aircraft completed to date and three more due by the end of 2008. A further 23 aircraft will undergo these modifications under the new contract in 2009-12.

ADF Air to Air Refuelling Capability—AIR 5402 Contractor:

• EADS CASA, Spain (Acquisition)

• Qantas Airways Ltd (Through–Life Support).

A significant shortfall in expenditure for 2007-08 was transferred to 2008-09 due to delays by EADS CASA for conversion and test planning milestones that were not completed until August 2008. This increase in 2008-09 expenditure has been offset by reprogramming to account for consequent slippage into 2009-10, resulting in only a small net increase to expenditure in 2008-09. The second phase of testing has commenced following installation of military systems and software.

Flight testing is expected to commence by end-2008 and continue to the third quarter of 2009. The six month slippage in schedule will not be recovered and delivery of the first aircraft is now expected in the fourth quarter of 2009. The second A330 aircraft arrived at Qantas Australian Conversion Centre in Brisbane in June 2008 and has commenced modifications.

Maritime Patrol and Resp onse Aircraft System—AIR 7000 Phase 2 Contractor: The Boeing Company (USA) through a cooperative arrangement with the USN.

152


This project seeks to replace the AP-3C Orion with the P-8A Poseidon through a cooperative program with the USN. The P-8A Spiral 1 Cooperative Development program will enable the Commonwealth to participate with the USN in the development of the P-8A Poseidon weapon system, reducing the risks and costs for subsequent Commonwealth acquisition. Project activity during 2008-09 will focus on finalising the P-8A Spiral 1 Cooperative Development MoU, and commencing the development of the Production, Sustainment and Follow-on Development (PSFD) MoU for later acquisition. The cooperative development program will enable the Commonwealth to participate in the development of requirements for the Spiral 1 upgrade and to gain visibility of the baseline P-8A design and performance capabilities. The cooperative acquisition strategy with the USN aims to reduce the risk and cost of participating in the production, testing and through-life support of the P-8A weapon system.

Project activity during 2008-09 will focus on finalising the P-8A Spiral 1 Cooperative Development MoU, collaborating with the USN on the P-8A Spiral 1 Systems Design and Development activity, and commencing negotiations of the PSFD MoU.

Airborne Surveillance for Land Operations—JP 129 Phase 2 Contractor: Contractor not yet selected.

The DMO had contracted Boeing Australia Limited, with its principal subcontractor, Israel Aerospace Industries Limited, to provide and support a Tactical Unmanned Aerial Vehicle system. Boeing experienced difficulty delivering the full contracted capability to a schedule and at a risk acceptable to Defence, so the acquisition and in-service support contracts were terminated on 4 September 2008.

In accordance with the deed of settlement, all moneys due to the Commonwealth have been receipted.

Defence now intends to restart the project with an emphasis on fielded systems which can be delivered and deployed in minimum time.

C-17 Globemaster III—AIR 8000 Phase 3 Contractor: The Boeing Company (USA) under a FMS Arrangement with the US Government.

Initial training of Air Force personnel has been completed, with training of the complete squadron cadre of pilots, loadmasters and maintenance personnel continuing until December 2008 after which the Air Force will manage ongoing training requirements. Role expansion to include Air Drop and high-dependency patient Aero-Medical Evacuation is occurring progressively in 2008-09 as planned. This requires specialist equipment to be procured, personnel trained and airworthiness accreditation to be obtained.

Airborne Early Warning and Control Program

Airborne Early Warning and Control Aircraft—AIR 5077 Phase 3 Contractor: The Boeing Company (USA).

On 10 June 2008, Boeing advised a further schedule delay of approximately 10 months to the delivery of the first fully mission capable aircraft, due to continuing problems associated with sub–system integration and radar and electronic support measures maturity. Boeing now proposes delivery of the first aircraft in January 2010, a total delay of 38 months against the contract baseline.

In order to minimise the impact of this latest delay, Boeing has proposed to the Commonwealth that it would deliver two aircraft in July 2009 with sufficient capability to enable the ADF to commence training and bed–down its logistics support systems. Defence continues to review the underlying details of the proposed revised Boeing schedule but assesses that there is still residual technical and schedule risk to the delivery of the first two aircraft in July 2009.

153


Defence is now planning to establish an initial operating capability by end of 2011 and final operating capability by end of 2012.

Because of the schedule delays, the first three aircraft are being used to finalise the Developmental Acceptance Testing phase. The remaining three aircraft are scheduled to complete their modification programs mid to late 2010.

The initial Airborne Early Warning and Control System (AEW&C) facility at RAAF Tindal is approximately 85 per cent complete and will now be finalised when work begins on the rest of the Tindal precinct. Construction of the main Tindal facilities was approved by Parliament in June 2008. The Operational Flight Trainer was delivered in June 2008, with final acceptance planned for March 2009.

Air Warfare Destroyer Program

Air Warfare Destroyer—Build—SEA 4000 Phase 3 Contractor: This Program is being delivered under an Alliance contract arrangement (the Alliance-Based Target Incentive Agreement, ABTIA) between ASC AWD Shipbuilder Pty Ltd, Raytheon Australia Pty Ltd and the Commonwealth (CoA) represented by the DMO.

In addition to the ABTIA, the CoA entered into a Platform System Design contract with Navantia S.A., the ship designer. Supply of the Aegis Combat System by the USN is via a FMS agreement.

A decision on whether to acquire a fourth AWD will be made in the context of the current Defence White Paper Force Structure Review.

Overall the project is on schedule and there have been no real cost increases to the project nor draw down of contingency. All major milestones have been achieved to date.

The AWD Alliance has released a range of Requests for Tenders (RFT) covering combat system equipment and hull block and module fabrication. The contract for the AWD Sonar System has been awarded to United Kingdom firm Ultra Electronics. Infrastructure work progressed on schedule at the South Australian State Government’s Common User Facility and ASC shipyard.

The major milestones to be achieved in the near future are the Preliminary Design Review in December 2008 and the selection of the Hull Block manufacturers in early 2009.

The readiness of shipyard infrastructure in Adelaide to support block fabrication in late 2009 is critical to the successful start of hull construction. Any delay in completing this infrastructure work is likely to affect the schedule for first ship delivery. All parties are working cooperatively to ensure the facilities are delivered on schedule. To date, construction of the Common User Facility and ASC shipyard is on schedule.

If information from equipment vendors is not available when required by the Platform System Designer (Navantia), there will be a delay in delivering production data packages to block fabricators. To mitigate this risk, the alliance has a two–pronged strategy; to work closely with vendors and the staged release of information to the Platform System Designer. The recent delivery of a major data drop to Navantia of Vendor Furnished Information (VFI) has considerably alleviated this risk.

154


Bridging Air Combat Capability—Super Hornet

Bridging Air Combat Capability—AIR 5349 Phase 1 Contractor: The Boeing Company (USA) under a FMS arrangement with the US Government.

The Super Hornet program is on schedule for delivery of Australia’s first six aircraft in the second quarter of 2010. The aircraft and ancillary equipment are being purchased under FMS arrangements with the US Government. Aircraft production contract signature occurred in late July 2008 with savings of some USD $225m on original FMS estimates. Contracts have also been awarded for aircraft engines and a number of items of ancillary equipment.

Electronic Systems Division

New Air D efence Command and Control Systems—AIR 5333 Contractor: Boeing Australia Limited.

The contractor commenced installation work at RAAF Tindal and associated sites in May 2008. This has progressed well and is expected to be completed in early 2009. Completion of the project’s critical design review in July 2008 allowed the project to enter the integration and test phase, which will commence at RAAF Tindal in late 2008. Software development and provision of Government-furnished obligations continues in parallel with the testing activities during the 2008-09 period.

The Commonwealth and Boeing signed a Deed of Settlement, Release and Amendment on 17 October 2008 which settled the project’s long-running commercial issues.

Software development risk is being managed through the use of Commonwealth resident teams, and active monitoring of contractor performance through software development–related metrics.

Electronic Warfare Self Protection—AIR 5416 Phase 2 Contractor:

• BAE Systems – Phase 2A

• BAE Systems (formerly Tenix Defence) – Phase 2B.

Phase 2A – Modifications to the first Black Hawk commenced June 2008 and ground and flight testing is planned to commence early 2009. Chinook modification kits will be retained for installation once aircraft can be made available from operational commitments.

Phase 2B – All 12 C-130H aircraft have been modified with the last aircraft delivered to Air Force by BAE Systems in April 2008. This phase of the Echidna project is being prepared for closure.

The software development aspects of the Electronic Warfare Controller for Phase 2A are extremely complex. There is a medium risk that software developmental problems could affect the overall project delivery schedule although with solid progress shown by BAE Systems during 2008, this risk is diminishing.

Next Generation Satellite Program—JP 2008 Phase 4 Contractor: The Boeing Company (USA) via the US Government under a MoU.

The first satellite, Wideband Global Satellite (WGS) F1, with a footprint over the Pacific Ocean has been providing operational capability to Australia since June 2008. WGSF2 launch date has slipped three to four months and will now most likely occur in December 2008. There will be no financial impact in relation to expenditure on the contract as the Australian financial commitment relates to

155


WGS satellite six (SV6). The project is progressing the interim anchoring solution to allow indigenous anchoring of WGS from the eastern and western seaboard.

High Frequency Modernisation—JP 2043 Phase 3A Contractor: Boeing Australia Ltd.

The first stage of the project has replaced the capability provided by the former Navy sites and Air Force stations. The second stage, to provide increased levels of automation, improved capability, enhanced security and survivability, reduced reliance on staff and to incorporate the new equipment into mobile platforms, is currently being implemented.

Due to difficulties with certain complex elements of design and integration and testing acceptance of the full final fixed network capability which was originally planned for 2008 may now be delayed until 2011. However, a recent independent technical review has confirmed the viability of the design and that there are no potential barriers to successful completion. A schedule review has also been conducted, to inform the way ahead and to enable revised delivery dates to be set. As the difficulties being experienced also affect the design of the mobile upgrade equipment, there is a flow on effect to completion of upgrades to mobile platforms.


Follow-on Stand-off Weapon—Air 5418 Phase 1 Contractor: An FMS case was established with the US Air Force in July 2006 to supply AGM-158 Joint Air-to-Surface Standoff Missiles (JASSM). A commercial contract was signed with Lockheed Martin Missiles and Fire Control in September 2006 for support to integration of JASSM with F/A-18A/B aircraft and supply of technical data and documentation for JASSM airworthiness certification and conduct of a maritime interdiction capability study.

A major risk was realised in mid 2008 when technical issues were encountered by the USN with the development of the F/A-18A/B operational flight program. Whilst the issues have been resolved, achievement of an IOC will be delayed by up to six months to June 2010. Flight testing of the new operational flight program continues. Data and hardware items acquired under FMS and the Lockheed Martin contract continued to be delivered on schedule. Lockheed Martin’s simulation studies to model missile performance in a maritime environment have progressed. During 2008–10 missile and aircraft integration testing will continue with testing being undertaken in Australia and the US, culminating in a live missile firing in Australia in early 2010.

Explosive Ordnance Reserve Stocks—JP 2085 Phase 1B Contractors: Multiple purchase contracts with Australian and overseas munitions suppliers.

The major focus for the remainder of 2008-09 will be on the establishment of arrangements for the Navy 5 inch projectile procurement and delivery to Army of Excalibur’s IOC by January 2009. The project expects to deliver Army with its Final Operational Capability for all medium artillery units by December 2009.

The major risk for this project continues to be related to the schedule and costs associated with acquisition and integration of 155mm Artillery Precision Guided Munition with the Australian M198 Gun System. Rigorous review of system specifications, and participation in or visibility of the US Government test program, combined with regular communication with the relevant overseas government agencies will provide higher quality indications of cost and schedule change.

156


Mulwala Redevelopment Project—JP 2086 Phase 1 Contractor: Bovis Lend Lease.

Design and construction activities are currently running approximately three months behind schedule as a result of contractor delays in achieving necessary State Government planning approvals. The contractor is reviewing the design and construction schedules with the aim of recovering slippage through undertaking parallel work packages.

Practical completion of construction is scheduled for July 2010 and completion of qualification of propellants for use in ADF ammunition is scheduled for September 2011. Certification of ammunition using the qualified products is scheduled for March 2013.


Armed Reconnaissance Helicopter—AIR 87 Phase 2 Contractor: Australia Aerospace.

As at 17 October 2008, the Commonwealth had accepted 12 Tiger Armed Reconnaissance Helicopters (ARH), the software support facility, the ground mission management system, facilities in Darwin, Northern Territory, and Oakey, Queensland, training courseware and four of the six ground training devices. The thirteenth ARH is in the process of being accepted.

Delivery of the remaining nine aircraft and the completion of delivery of all supplies is presently the subject of further detailed scheduling to enable Army to conduct operational test and evaluation in 2009–10. Australia has now trained a total of 17 ARH pilots. This includes Battle Captains, instructors and test pilots. A further three pilots and seven Battle captains are currently in training and should qualify by the end of November 2008. A group of seven Army combat aviators (experienced operational helicopter pilots) were trained during 2008 as the emphasis shifts from instructors towards operational crews for the 1st Aviation Regiment. ARH Tiger has now flown in excess of 3,000 hours, mainly in support of training in Australia. The Australian flight hours’ achievement is about 30 per cent of the international Tiger fleet that includes France, Germany and Spain.

Payments to Australian Aerospace have resumed although one-third was retained pending completion of the contract changes implementing the Deed of Agreement. These are expected to be signed during December 2008. The project has experienced a much improved rate of achievement since dispute resolution.

As part of the settlement, Australian Aerospace has provided two EC–135 helicopters in Darwin for ARH aircrew currency training at a rate of 1,600 hours per year. In addition, three ARH were relocated from Oakey in Queensland to Robertson Barracks in Darwin in late June 2008, to further achieve training objectives.

Mission equipment test and acceptance is progressing well. The final ARH Weapon Test Campaign was completed successfully by Air Operations Support Group in September 2008 and will result in a Hellfire Missile clearance and certification for the ARH.

Multi Role Helicopter—AIR 9000 Phase 2 Contractors: Australian Aerospace, CAE Australia.

The first four aircraft have been manufactured in France; the remaining 42 have commenced assembly at Australian Aerospace’s Brisbane facility.

The third MRH-90 arrived from France on 22 June 2008 and was accepted by the DMO on 7 August 2008. The fourth MRH-90 has completed a data collection task required for the design of the

157


full flight and mission sim ulators being developed by CAE Australia and was delivered from France on 14 November 2008 by RAAF C-17. This aircraft is scheduled for acceptance on 5 December 2008. The first Australian assembled aircraft remains on schedule for acceptance on 17 December 2008.

Contracts are currently being awarded for the construction of facilities in Townsville, Oakey, Brisbane and Nowra. A RFT is being developed for the provision of Ground Training Devices.

Land Systems Division

Upgrade of M-113 Armoured Vehicles—LAND 106 Contractor: BAE Systems Australia (formerly Tenix Defence).

Production vehicles required to commence crew and maintenance training have now been delivered. Procurement of initial spares, special tools and test equipment to support the introduction of vehicles has commenced and will continue in parallel with vehicle production.

Results of the comprehensive development test program to date are positive; however, a medium technical risk will remain until all testing is complete in 2009. The contractor has advised that the delivery of the last vehicle will be as contracted in December 2010. To achieve this the contractor is preparing additional facilities in Williamstown, VIC and Wingfield, SA to convert vehicle hulls. The DMO assesses that this remains a high risk production schedule subject to how quickly the contractor can ramp up hull conversions at the alternative facilities.

Bushmaster Infantry Mobility Vehicle-Project Bushranger—LAND 116 Phase 3 Contractor: Thales Australia (formerly known as ADI Ltd).

The project is acquiring 737 vehicles in seven variants, an increase of 14 vehicles since the release of the Portfolio Budget Statements 2008-09.

One hundred and two Enhanced Land Force vehicles have been delivered with the remaining 42 to be delivered by March 2009. Successful negotiations with Thales have resulted in a contract amendment for the procurement of an additional 293 Bushmaster vehicles for the protected mobility medium requirement for Land 121 Overlander Phase 3. Delivery will commence in May 2009 and will be completed by June 2012. The through–life support contract will be amended to include the additional vehicles.

All weapon stations and Fire Suppression Systems have been delivered, with the delivery of spall curtains to commence in late 2008. The weapon stations have been fitted to deployed vehicles, with the Fire Suppression Systems and spall curtains to commence fitment to deployed vehicles in early 2009.


Guided Missile Frigate Upgrade Implementation—SEA 1390 Phase 2 Contractor: Thales Australia (formerly known as ADI Ltd).

HMAS Darwin was provisionally accepted by Navy in August 2008. The last of the upgrades in HMAS Newcastle is still on schedule for provisional acceptance in June 2009. HMA Ships Sydney, Melbourne and Darwin are operating under Navy control, progressing towards initial operational release in early 2009. Electronic Surveillance and Underwater Warfare Systems performance deficiencies continue to be addressed in HMAS Melbourne. HMA Ships Sydney and Darwin have been accepted from the contractor.

158


Standard Missile Replacement—SEA 1390 Phase 4B Contractor: The DMO is the Procurement Coordinator, supported by the US Department of Defense under an FMS arrangement and commercial contracts. Original Equipment Manufacturers are engaged through commercial contracts to mitigate delivery risk of the Standard Missile (SM-2) capability.

An initial number of SM-2 tactical missiles and spare missile sections were received in Australia in September 2008.

Software development and integration under FMS arrangements has commenced with the Stage 1 Critical Design Review held in late August 2008. Integration testing of the various equipment and software items has commenced. These activities will culminate in integration of the Weapon Control System software which has commenced in the US. Continuing software development, integration and testing will follow with initial shipboard fielding in Australia in late 2009.

New Heavyweight Torpedo—SEA 1429 Phase 2 Contractor: US Department of Defense under a MoU with work performed by Raytheon and the US Naval Undersea Warfare Center.

HMAS Waller successfully undertook a live heavyweight torpedo firing at RIMPAC 2008 and sinking an ex-USN Destroyer, proving the integrated replacement combat system with the new heavyweight torpedo capability. Installation of heavyweight torpedo modifications in HMAS Farncomb are complete with the boat currently undertaking sea trials and expected to be operational in early 2009. Installations in HMA Ships Dechaineux and Sheean are progressing satisfactorily, however HMAS Dechaineux is now expected to complete her Full Cycle Docking in late 2009. Progressive shipments of torpedoes to Australia continue to meet RAN requirements. Additional estimated spend for 2008-09 allows for the purchase of an additional torpedo for trials purposes, which was originally scheduled for purchase in future years.

The installation schedule is synchronised with the submarine docking program and any change in that program is a medium risk to the project delivery schedule.

Collins Class Submarine Reliability & Sustainability—SEA 1439 Phase 3 Contractor: ASC Pty Ltd is the submarine builder and designer for through-life support activities, engaged under a through-life support agreement for up to 25 years, with work packages for all submarine-related projects and product contracted annually.

The project scope is comprised of several sub-projects which separately address a number of submarine reliability and sustainability conditions. The documentation and delivery of each subproject is subject firstly to the availability of funding and contractor resources, and then the timing of submarine maintenance periods. Overall, this project competes for funding and platform availability as a lower priority than two other submarine-related projects SEA1439 Phase 4A and SEA1429 Phase2.

As a result, the achievement of the budget for 2008-09 is dependent on the opportunities for contracted resources and maintenance periods against the other projects’ competing priorities.

A number of sub-projects’ modifications were progressed successfully to schedule. The expenditure underachievement for 2008-09 reflects specialist design and production work not performed on this project.

Limited contractor specialist design and production capacity continues as a medium risk. Contracting work packages on an annual basis under the through-life support agreement is a medium risk to controlling costs within the capped project budget.

159


Amphibious Ships

Amphibious Deployment and Sustainment—JP 2048 Phase 4A/B Contractor: BAE Systems Australia (formerly Tenix Defence).

Steel was cut for the first ship on 23 September 2008. Ship 01 (HMAS Canberra) is due for acceptance in January 2014 and Ship 02 (HMAS Adelaide) in August 2015.

The main risk of technical regulatory acceptance is assessed as high and is being mitigated through early implementation of rigorous oversight of technical and engineering issues. Significant risks of authorisation of contract variations and Intellectual Property controls through the sale of the prime contractor organisation are being mitigated by rigorous project management.


Detailed Analysis and Acquisition Planning—AIR 6000 Phase 1B Contractor: Lockheed Martin Aeronautics is contracted to the US Government for the F-35 Lightning II Joint Strike Fighter (JSF) System Development and Demonstration (SDD) and the JSF PSFD phases of the JSF program. Lockheed Martin is teamed with Northrop Grumman and BAE Systems for the JSF air vehicle. Pratt and Whitney and the General Electric/Rolls Royce Fighter Engine Team are the primes for the two engines being developed for the F-35.

Defence analysis is focussed on the F-35 Block 3 Conventional Take Off & Landing (CTOL) variant. The ongoing analysis indicates that the CTOL F-35, if it matures as planned, and when integrated into the networked ADF, will meet the ADF's future air combat needs.

Key decisions on the scope and timing of the project are expected to be made in the context of the new Defence White Paper, Force Structure Review and subsequent Defence Capability Plan. On current planning, Second Pass is planned for June 2009.

160

Project number

Financial year(s)

reported in Top 30

Approvedproject

expenditure$m


30 June 2008 $m

Budget estimate 2008-09

$m


$m Variation

$m Status Report Aerospace Systems

Hornet Upgrade Project – Target Designation System

AIR 5376 Phase 2.4

2006-07 152 86 15 20 5 Initial Operational Capability achieved in June

2007. The project is on schedule and Final Operational Capability is expected by December 2009.

P–3C Update Implementation

AIR 5276 Phase 2

2004-05 2007-08 908 864 12 8 -4

Both acoustics and avionics processors continue to be delivered on schedule. Radar: a senior level Project

Management Review was conducted in October 2008 to address on going schedule delays, reporting and other project management issues. Outcomes included visibility to senior Elta management of project position, Elta delivering a revised schedule in November 2008 for comment and a status report.

F/A–18 Hornet Structural Refurbishment Program

AIR 5376 Phase 3.1

2004-05 127 100 6 3 -3 Work program on schedule and within budget.

Strategic Air Lift Capability AIR 5216 Phase 1

2005-06 1,047 1,021 3 1 -2 Remaining project activity relates to deliveries of some components of outstanding spares procurement.

Amphibious Vessels

Maritime Operations Support Capability

SEA 1654 Phase 2A

2005-06 2006-07 145 129 5 5 - Project schedule is continuing on track and spend is

estimated as programmed.

Electronic Systems

MILSATCOM Terrestrial Infrastructure

JP 2008 Phase 3E

2004-05 2005-06 2007-08

210 187 11 14 3 The project has commenced the systems integration phase,

with the Theatre broadcast software roll-out currently underway. The project remains on schedule for delivery in

December 2009.

Current Status of Acquisition Projects not included in the Top 30 Table 2.5.2 provides an update on the status of major projects reported in the last five financial years. These projects dropped below the Top 30 expenditure thresholds at the time of producing the Portfolio Budget Statements 2008-09.

Table 2.5.2—Status of previously reported Top 30 projects

Project number

Financial year(s)

reported in Top 30

Approvedproject

expenditure$m


30 June 2008 $m


$m


$m Variation

$m Status Report

Jindalee Radar Network JP 2025 Phase 3 & 4

2004-05 2005-06 2006-07

1,248 1,226 6 2 -4

A 46-month maintenance and support contract expired on 16 February 2007. Subsequent maintenance contracts are managed from Sustainment (Output 1.2). The residual activities on this project relate to the finalisation of the capability’s support environment. Integration of grid power into the radar sites at Longreach has not proven cost effective and so will not be pursued. The project will now investigate the possibility of utilising alternative power generation technology.

Explosive Ordnance

Air to Air Weapons Capability

AIR 5400 Phase 1/2

2004-05 317 286 - 1 1 Capability is in service. Project closure action has been delayed until early 2009 pending clarification of guidance transfer approval and project closure processes.

Air to Surface Stand-Off Weapon Capability

AIR 5398 Phase 1

2004-05 449 399 - - -Capability is in service. Project closure action has been delayed until early 2009 pending clarification of guidance transfer approval and project closure processes.

Air to Air Weapons Follow-On Buy

AIR 5400 Phase 3

2004-05 184 143 - - -Capability is in service. Project closure action has been delayed until early 2009 pending clarification of guidance transfer approval and project closure processes.

Lightweight Torpedo Replacement

JP 2070 Phase 2

2004-05 2005-06 2006-07 2007-08

347 195 17 19 2

The first successful MU90 Torpedo exercise firing in Australia was achieved in June 2008 and the Torpedo Maintenance and Integration Facility at HMAS Stirling was opened in July 2008. Surface integration is tracking well. Air Integration has been put on hold pending the outcomes of the White Paper.

Evolved SeaSparrow Missile

SEA 1428 Phase 2B/3

2004-05 279 245 6 8 2 The capability is in service and deployed. Deliveries of some support items, spares and remediation work on the test station remain outstanding.

Project number

Financial year(s)

reported in Top 30

Approvedproject

expenditure$m


30 June 2008 $m


$m


$m Variation

$m Status Report Helicopter Systems

Anzac Ship Helicopter SEA 1411 Phase 1

2004-05 2005-06 2006-07

1,114 953 13 2 -11

On 5 March 2008, the Minister for Defence announced the Government’s intention to cancel the Seasprite program and enter into negotiations with Kaman Aerospace Corporation to terminate the contract. On 20 March 2008, the Australian Government and the Contractor reached mutual agreement to cancel the project subject to US Government approval. One element of the agreement is that at least 50 per cent of the proceeds will be provided to the Commonwealth. The first stage of a two-part US Government approval

was obtained on 8 August 2008, granting authority to transfer the Seasprite aircraft and equipment to the US under Kaman control. The aircraft and equipment were shipped from Australia late October/early November 2008, and the title transfer to Kaman is expected to be progressed after their arrival in the US.

Land Systems

Direct Fire Guided Weapon

Ground Surveillance Radar

Australian Light Armoured vehicles

LAND 40 Phase 1

LAND 53 Phase 1E

LAND 112 Phase 3

2004-05

2004-05

2005-06

147

81

690

123

81

588

17

-

2

4

-

2

-13

-

Full Operational Capability was achieved in March 2008, and the Javelin weapon system is currently transitioning into service.

Project has been completed and closed.

-

All prime equipment has been delivered. ASLAV Surveillance prototype is undergoing test and evaluation. Crew Procedural

Trainer has been introduced into service and a Through Life Support contract is being established. Extensions to ASLAV

hangers and support facilities are being planned by Infrastructure Division.

Project number

Financial year(s)

reported in Top 30

2005-06

Approvedproject

expenditure$m

93


30 June 2008 $m

56


$m


$m

6

Variation $m

-

Status Report

Bulk Liquid Tankers ($2.626m) – project has been completed and closed. Heavy Recovery Vehicle ($33.525m) – project has been completed and closed. Mack Noise Reduction ($14.000m) – in contract. Passenger/Cargo Restraint & Separation – Unimog and Mack Gun Tractors ($11.427m)– in contract – due for completion and closure in 2009. Passenger/Cargo Restraint & Separation – Land Rover ($11.000m). Regional Force Surveillance Vehicle – in contract. Land Rover Handling Upgrade – project has been completed and closed.

General Service Field Vehicles – Overlander

LAND 121 Phase 2 6

Tank Replacement Project LAND 907 Phase 1

2005-06 2006-07 2007-08

575 425 9 5 -4

Project is on schedule and within budget. All major capability platforms have been delivered and are in service. Current focus is to establish a Through Life Support contract, Leopard Tank disposal and the acquisition of Tank Urban Survivability kits.

Maritime Systems

Anzac Ship Anti-Ship Missile Defence

SEA 1448 Phase 2B

2007-08 453 75 22 57 35

Under the revised acquisition strategy, industry contract negotiations are progressing, and the phased array radar demonstrations were successful in November 2008. Production of the prototype phased array radar mast continues on schedule.

Anzac Ship Project SEA 1348 Phase 2

2004-05 2005-06 2006-07 2007-08

5,379 5,343 19 4 -15 The last ship was delivered in June 2006. Contractor warranty works are progressing as well as essential standardisation upgrades to ships.

Collins Replacement Combat System

SEA 1439 Phase 4A

2004-05 2005-06 2006-07 2007-08

457 390 19 19 -Installations in HMA submarines Dechaineux and Sheean are progressing satisfactorily, and the system has been proven in HMAS Waller.

Anzac Ship Anti-Ship Missile Defence

SEA 1448 Phase 2A

2004-05 2005-06 2006-07 2007-08

375 146 21 23 2 Production and integration successes with infra-red search and track and upgraded combat management system hardware and software continue. Delivery of all hardware and software continues to meet capability on schedule.

Project number

Financial year(s)

reported in Top 30

Approvedproject

expenditure$m


30 June 2008 $m


$m


$m Variation

$m Status Report

Armidale-class Patrol Boat SEA 1444 Phase 1

2004-05 2005-06 2006-07 2007-08

534 461 15 16 1 Navy’s operational release is planned for early 2009. All patrol boats are engaged in operations.

Ships Self Defence Capability – RAPID Acquisition

SEA 1779 Phase 1

2007-08 54 24 16 17 1 Installation in all ships (Manoora, Kanimbla and Tobruk) is 97 per cent complete.

Underwater and Surface Warfighting Upgrade Program

SEA 1348 Phase 3

2004-05 161 132 5 6 1 Harpoon systems installation will continue in 2008-09 along with associated activities and tasks in support of the Harpoon systems.


Minor Capital Investment Programs Minor capital projects deliver capability to meet emerging enhancement, replacement or new requirements of relatively low values and are funded from allocations outside the Defence Capability Plan. There are five Defence Minor Capital Investment Programs, funded by the Capability Managers through Materiel Acquisition Agreements as described in Chapter Two. There are currently over 180 minor projects with an average value of $7.0m.

OUTPUT 1.2-MANAGEMENT OF CAPABILITY SUSTAINMENT

Sustainment involves the provision of in-service support for specialist military equipment, including platforms, fleets and systems, operated by Defence. Typical services include repair and maintenance, engineering, supply, configuration management and disposal action. The level of the DMO’s service provision is linked to the level of capability preparedness directed by the CDF, which, in turn, is determined by the Government’s funded requirements for the level of Defence capability.

The DMO's sustainment services to Defence, and the price the DMO receives for these services, are formalised in Materiel Sustainment Agreements between the DMO and Defence Capability Managers.

The revised planned resource use for Output 1.2 is $5,117.3m in 2008-09, an increase of $250.7m from the 2008-09 budget estimate. Planned resources include $46.027m of expected net personnel and operating costs being triggered and subsequently approved by Defence during 2008-09.

Table 2.5.3 lists the Top 20 Sustainment products ranked by forecast expenditure in 2008–09. The key activities associated with the key deliverables under each Materiel Sustainment Agreement are addressed in the product descriptions. There are currently seven Materiel Sustainment Agreements under management in Output 1.2 incorporating 99 sustainment schedules.

166

Table 2.5.3—Top 20 sustainment products by forecast expenditure in 2008-09 Budget Estimate

2008-09 $m


$m Variation



P-3C/AP-3C Orion Weapons System 135 137 2 Variation attributable to Global Update offset by reduced operational supplementation funding.

F/A-18 Hornet Weapons System 133 130 -3 The revised estimate reflects a combination of cost savings, Global Update and a reduced Net Personnel Operating Cost allocation.

C-130J-30 Weapons System 127 136 9 Variation attributable to Global Update and minor variations.

F-111 Weapons System 120 120 - -

Lead-In Fighter Hawk 127 Weapons System 88 88 - -

C-17 Globemaster III 86 94 8 Variation attributable to Global Update.

C-130H Weapons System 68 61 -7 Revised application of operational supplementation funding.

Electronic Systems Division

Wide Area Surveillance Capability 76 75 -1 Minor change following a Branch review, and also includes a change in the attribution of the DMO’s indirect costs.

Battlespace Communications Systems 70 105 35 The estimate represents additional operations funding provided by Defence. However the likelihood is that these funds will be returned to Defence this financial year.


Explosive Ordnance – Air Force, Navy, Army 373 453 80 Variation is attributable to new capability recently introduced into service, realignment of budget, Explosive Ordnance reforms and price variation.


Multi Role Helicopter MRH90 87[2] 95 8 Variation attributable to Global Update. It is expected that the actual achievement will be less than this when adjusted for the MRH90 flying rate

that has been below the planned rate.

Black Hawk S70A-9 Weapons System 73 73 0 -

Land Systems Division

B Vehicles 117 126 9 Variation is the result of Army's reprioritisation of funding for additional sustainment activities for B Vehicles.

Commercial Vehicle Fleet 94 82 -12 Variation is the result of one off savings identified by the Commercial Vehicle program in 2008-09.

Budget Estimate2008-09

$m


$m Variation


ADF Clothing and Equipment 76 94 18 Variation is the result of Army's reprioritisation of funding for additional sustainment activities for clothing and support to operations.


Fuels and Lubricants – Navy, Army, Air Force 442 428 -14 The decrease is the result of the contribution to the efficiency dividend and price indexation adjustments.

Collins class submarines 296 304 8 Variation attributable to Global Update and rollover of funds for work not finalised in 2007-08, offset by a contribution to the efficiency dividend.

Anzac class frigate 255 270 15 The increase is the result of the rollover of funds for inventory not delivered in 2007-08.

Adelaide class frigate 112 113 1 Inclusion of Operations funding offset by a contribution to the efficiency dividend.

Mine Hunter Coastal 61 58 -3 The decrease is the result of the contribution to the efficiency dividend.

Subtotal Top 20 Sustainment Products 2,889 3,042 153 Notes 1. The revised estimate 2008-09 will include economic parameter adjustments for price update and foreign exchange calculation, referred to in explanations as the Global Update. 2. This was erroneously reported in the Portfolio Budget Statements 2008-09 p191 as $127m.


UPDATED INFORMATION ON DMO SUSTAINMENT PRODUCTS

Aerospace Systems Division Information remains as reported in the Defence Portfolio Budget Statements 2008-09, except for the following:

Aerospace Systems Products

P-3C/AP-3C Orion Weapons System Some AP-3C Orion aircraft recently reached their structural safe design life, and as a result a Safety-By-Inspection regime of targeted additional structural inspections is being undertaken.

F/A-18 Hornet Weapons System A new contracting strategy has been developed to provide through-life support for deeper maintenance and modifications to the Hornet. Contracts are expected to be in place by December 2008. The scope of work reflects a decrease in workload associated with completion of the AIR5376 Phase 2.2 modification program in December 2008, and the reduction in scope of AIR5376 Phase 3.2 from 49 CBR to 10 as a result of fatigue life extensions supported by Defence Science and Technology Organisation testing.

Electronic Systems Division Information remains as reported in the Defence Portfolio Budget Statements 2008-09, except for the following:

A new contract for the operation, maintenance and support of the Harold E Holt facility at Exmouth, WA, is being developed for release to tender in 2009. Approval to close the Navy Transmission Station Darriman in Sale, Vic, is expected from Navy within the next 12 months.

The major new Air Traffic Control Radar and Air Defence Radar systems are expected to transition to sustainment in mid-2009. The in-service support arrangements for the recently delivered Australian Defence Air Traffic System, including radar mechanical maintenance, have commenced and are working well.

One of the four new systems is deployed to the Middle East Area of Operations in support of Operation Slipper. Major upgrades to the interim Regional Operations Centre software are continuing on a six-monthly cycle.

Efficiency measures across all products managed by the Division continue to be identified and implemented: Two recent radio purchases under sustainment support to operations, achieved 10 per cent and 30 per cent savings respectively. By altering the maintenance concept on Satellite ground equipment approaching life-of-type from “preventive” to “on-condition”, savings of 50 per cent over the original contract have been achieved.

Electronic Systems Products

Battlespace Communications Systems A new contract to improve the in-service support of the ADF's Battlespace trunk communications suite is in place with BAE Systems Australia. BAE Systems has successfully ramped-up to meet commencement of operation in October 2008.

Availability of sufficient contracting resources to effect new contracts or contract changes is a risk to achieving sustainment savings efficiencies in a timely manner.

169


Explosive Ordnance Division Information remains as reported in the Defence Portfolio Budget Statements 2008-09, except for the following:

Explosive Ordnance Product

Explosive Ordnance-Navy, Army, Air Force The ability to provide munitions products in the required quantities to Navy, Army and Air Force continues to be impacted by high global demand. Price increases due to this high demand are being encountered. In an effort to reduce the supply chain risks associated with high consumption and critical items, opportunities for greater indigenous manufacturing are being actively explored. Price increases will place pressures on the sustainment budgets of Navy, Army, and Air Force from 2009-10.

Helicopter Systems Division Information remains as reported in the Defence Portfolio Budget Statements 2008-09, except for the following:

Helicopter System Products

Multi Role Helicopter MRH90 Three MRH90 helicopters have been accepted into service, and over the course of 2008-09 a further five helicopters will be delivered.

The planned rate of effort for the year was 600 hours, however this will not be met due to issues with the initial supply of spares for the aircraft. The rate of effort will progressively build to the mature state of 10,300 hours per year by 2014-15.

Land Systems Division Information remains as reported in the Defence Portfolio Budget Statements 2008-09, except for the following:

In 2007-08 Land Systems Division completed 32 rapid acquisition projects at a total cost of $49.282m. In 2008-09, the division is progressing 14 rapid acquisition projects with an approved budget of approximately $93.973m. These will be delivered during 2008-09.

Land Systems Products

ADF Clothing The ADF Clothing and Personal Equipment Procurement Plan for the period 2009-2013 released in October 2008, advises industry on the tendering activities that will establish standing offer agreements for the acquisition of combat and non-combat clothing.

Maritime Systems Division Information remains as reported in the Defence Portfolio Budget Statements 2008-09, except for the following:

An additional challenge for sustainment during 2008-09 is managing the budgetary impact of the volatile price of oil, and the large reduction in the exchange rate, on the procurement of fuel.

OUTPUT 1.3—PROVISION OF POLICY ADVICE AND MANAGEMENT SERVICES

The DMO’s direct appropriation for Output 1.3 of $94.960m has not changed since the 2008-09 budget.

170


The revised price for Output 1.3 is $103.015m in 2008-09, an increase of $0.211m from the 2008-09 budget estimate.

171

SECTION THREE

DEFENCE MATERIEL ORGANISATION EXPLANATORY TABLES AND FINANCIAL

STATEMENTS

CHAPTER SIX — EXPLANATORY TABLES

EXPLANATORY TABLES

ESTIMATES OF VARIATIONS TO AVERAGE STAFFING LEVEL


EXPLANATORY TABLES

Special accounts provide a means to set aside and record amounts used for specified purposes. Table 2.6.1 shows the expected additions (receipts) and reductions (payments) for each account used by DMO. The corresponding table in the Portfolio Budget Statements 2008-09 is Table 2.6.2.

[1] Table 2.6.1—Estimates of special account flowsOpening Closing balance Receipts Payments Adjustments balance

Outcome 2008-09 2007-08

2008-09 2007-08

2008-09 2007-08

2008-09 2007-08

2008-09 2007-08

$'000 $'000 $'000 $'000 $'000

DMO Special Account [2] 1 987,862 10,237,528 10,328,728 - 896,662

564,819 9,876,149 9,453,106 - 987,862

DMO Other Trust Monies Special Account [3] 1 694 200 200 - 694

905 283 494 694

Total special accounts

2008-09 Budget estimate 988,556 10,237,728 10,328,928 - 897,356 897,356

Total special accounts Total special accounts

2007-08 estimat2007-08 estimated actual ed actual 565,724 565,724 9,876,432 9,876,432 9,453,600 9,453,600 -- 988,556 988,556 Notes 1. GST and the appropriation are included in this table. 2. The DMO Special Account is established under section 20 of the Financial Management and Accountability Act 1997. 3. The DMO Other Trust Monies Special Account is established under Section 20 of the Financial Management and

Accountability Act 1997.

177


ESTIMATES OF VARIATIONS TO AVERAGE STAFFING LEVEL

Changes in Average Staff Level (ASL) are presented in the Portfolio Additional Estimates Statements at the whole of agency level to demonstrate any movements since Budget. The ASL figures for Budget were reported in agency Portfolio Budget Statements 2008-09 in the Outcome Resourcing Table 2.5.2.

Table 2.6.2—Average Staffing Level (ASL)[1]

2008-09 Budget

2008-09 Revised Variation

Outcome 1

Defence capabilities are supported through efficient and effective acquisition and through-life support of materiel

5,375 5,390 15 Total 5,375 5,390 15

Note: 1. Average staffing levels do not include military staff posted to the DMO, as military staff remain employees of Defence

and are included in its staffing numbers. The average staffing levels for military staff posted to the DMO is provided in Chapter 4.

178

CHAPTER SEVEN — BUDGETED FINANCIAL STATEMENTS

ANALYSIS OF BUDGETED FINANCIAL STATEMENTS



ANALYSIS OF BUDGETED FINANCIAL STATEMENTS

Revisions to the budgeted departmental financial statements for the DMO since the Portfolio Budget Statements 2008-09 are presented in this section.

Budgeted income statement An increase in the DMO’s estimated income and expenditure for 2008-09 ($96.7m) is largely a result of the movements as detailed below:

• supplementation due to foreign exchange rates ($531.9m)

• the reprogramming of major capital projects cash flow to future years (-$514.0m)

• increase in sustainment funding ($145.8m)

• decreases predominantly in approved major capital investment, unapproved major capital investment and minor capital investment (-$67.0m).

Budgeted departmental balance sheet The balance sheet has been updated to reflect the 2007-08 audited financial statements and adjustments to the budgeted income statement described above.

Statement of cash flows The estimated cash flows have been updated to reflect the changes in the income statement and balance sheet as noted above and in particular:

• increase in goods and services ($38.0m) reflecting the reprogramming of major capital cash flow, foreign exchange and sustainment increases

• inclusion of an estimate ($20.0m) of interest from overseas bank accounts which is returned to the OPA when receipted

• changes to foreign government activities and GST receipts ($64.0m).

181


Table 2.7.1—Budgeted departmental income statement (for the period ending 30 June)

Actual 2007-08 $'000

Revised budget 2008-09 $'000

Forward estimate 2009-10 $'000



INCOME

Revenue

Revenues from Government 93,256 94,960 94,294 91,579 92,629 Goods and services 8,262,918 9,544,464 11,977,454 12,651,951 12,415,302 Other 76,442 65,000 65,000 65,000 65,000

Total revenue 8,432,616 9,704,424 12,136,748 12,808,530 12,572,931

Gains

Net foreign exchange gains 11,807 - - - -Other 39,638 39,638 39,638 39,638 39,638

Total gains 51,445 39,638 39,638 39,638 39,638

Total income 8,484,061 9,744,062 12,176,386 12,848,168 12,612,569

EXPENSE

Employees 458,992 465,592 450,608 461,418 462,791 Suppliers 7,976,766 9,274,675 11,722,729 12,385,268 12,149,136 Depreciation and amortisation 4,963 3,795 3,049 1,482 642 Write-down of assets and impairment of assets 754 - - - -Other 5 - - - -

Total expenses 8,441,480 9,744,062 12,176,386 12,848,168 12,612,569

Net operating result 42,581 - - - -

182


Table 2.7.2—Budgeted departmental balance sheet (as at 30 June)

Actual 2007-08 $'000





ASSETS

Financial assets

Cash and cash equivalents 32,119 33,119 32,119 32,119 32,119 Receivables 1,088,556 945,448 823,671 700,513 505,229

Total financial assets 1,120,675 978,567 855,790 732,632 537,348

Non-financial assets

Infrastructure, plant and equipment 10,274 10,274 10,274 10,274 10,274 Intangibles 5,315 5,315 5,315 5,315 5,315 Other non-financials assets 1,377,830 1,377,830 1,377,830 1,377,830 1,377,830

Total non-financial assets 1,393,419 1,393,419 1,393,419 1,393,419 1,393,419 Total assets 2,514,094 2,371,986 2,249,209 2,126,051 1,930,767

LIABILITIES

Payables

Suppliers 1,142,323 1,142,323 1,142,323 1,142,323 1,142,323 Other payables 994,143 844,056 712,942 581,267 387,286

Total payables 2,136,466 1,986,379 1,855,265 1,723,590 1,529,609

Provisions

Employees 150,464 158,443 166,780 175,297 173,994 Total provisions 150,464 158,443 166,780 175,297 173,994

Total liabilities 2,286,930 2,144,822 2,022,045 1,898,887 1,703,603 Net assets 227,164 227,164 227,164 227,164 227,164

EQUITY

Contributed equity 141,724 141,724 141,724 141,724 141,724 Retained surpluses or accumulated deficits 85,440 85,440 85,440 85,440 85,440

Total equity 227,164 227,164 227,164 227,164 227,164

Current assets 2,054,289 1,912,181 1,789,404 1,666,246 1,470,962 Non-current assets 459,805 459,805 459,805 459,805 459,805 Current liabilities 1,988,483 1,888,462 1,802,320 1,715,939 1,576,175 Non-current liabilities 298,447 256,360 219,725 182,948 127,428

183

Table 2.7.3—Budgeted departmental statement of cash flows (for the period ended 30 June)

OPERATING ACTIVITIES

Cash received

Goods and services

Appropriations 52,000 9

20,000

4,960

11,968,117

94,294

12,643,434 12,416,605

91,579 Interest

Net GST received 479,504 800,663 845

20,000

,863

20,000

Other cash received

Total cash received 8,803,882 10,3

85,000

49,728 12,948,074 13,665,876 13,424,120

Cash used

Employees 446,966 442,271 452,901 Suppliers

Net GST paid 533,857 632,283 800,663 845,863 829,886 Other cash used

Total cash used 8,789,356 10,344,933 12,946,025 13,664,394 Net cash from or (used by) operating activities

Actual 2007-08 $'000

8,207,991 9,466,577

18,591

45,796

7,789,942

18,591

14,526


683,191

9,2

457,613

35,037

20,000

4,795


20,000

65,000

11,683,091

20,000

2,049


65,000

12,345,630

20,000

1,482

13,423,478

Forward estimate 2011-12$'000

92,629

829,886

65,000

12,1

464,094

09,498

20,000

642

INVESTING ACTIVITIES

Cash used

Purchase of property, plant and equipment

Total cash used

Net cash from or (used by) investing activities

Net increase or (decrease) in cash held

Cash at the beginning of the reporting period

4,374

4,374

-4,374

10,152

21,967

3,795

3,795

-3,795

1,000

32,119

3,049

3,049

-3,049

-1,000

33,119

1,482

1,482

-1,482

-

32,119

642

642

-642

32,119

Cash at the end of the reporting period 32,119 33,119 32,119 32,119 32,119


184

Table 2.7.4—Departmental statement of changes in equity — summary of movement (Budget year 2008-09)

Accumulated results $'000

Asset revaluation

reserve $'000

Other reserves $'000

Contributed Equity /

capital$'000

Total equity

$'000

Opening balance as at 1 July 2008

Balance carried forward from previous period

Adjusted opening balance 85,440

85,440

-

-

-

-

141,724

141,724

227,164

227,164

Net operating result

Estimated closing balance as at 30 June 2009

-

85,440

-

-

-

-

-

141,724

-

227,164


185



The notes to the Budgeted Financial Statements remain as reported in the Portfolio Budget Statements 2008-09.

186

PART THREE

DEFENCE HOUSING AUSTRALIA

Part Three – Defence Housing Australia

OVERVIEW

The overview, including outcome and output information, remains as reported in the Portfolio Budget Statements 2008-09.


The following budgeted financial statements for DHA are presented in this section.

Budgeted Income Statement This statement provides the expected financial results for DHA by identifying full accrual expenses and revenue s.

Budgeted Balance Sheet Shows the financial position of DHA. It enables decision makers to track the management of DHA’s assets and liabilities.

Statement of Cash Flows Budgeted cash flows, as reflected in the statement of cash flows, provide information on the extent and nature of cash flows by categorising them into expected cash flows from operating activities, investment activities and financing activities.

Capital Budget Statement Shows all proposed capital expenditure funded from internal sources, including borrowings. Capital outlays on sale and leaseback stock is shown in Operating Activities in the Statement of Cash Flows.

Non-Financial Assets – Summary of Movement This statement shows only the budget year 2008-09.

188

Table 3.1.1—Budgeted Income Statement Projected

Results Forward Estimate

Revised Estimate

Forward Estimate

Forward Estimate

Forward Estimate

2007-08 2008-09 2008-09 2009-10 2010-11 2011-12 $’000 $’000 $’000 $’000 $’000 $’000

REVENUE Revenue from ordinary activities Goods and services 783,112 835,869 776,946 852,252 845,125 840,498 Interest 7,053 2,661 4,838 7,263 7,880 10,888 Net gain from sale of assets 487 581 115 74 93 101

Fair Value Gains- Investment Property Revenues from ordinary activities EXPENSE

42,415 40,870 40,870 44,415 43,565 44,113 833,067 879,981 822,769 904,004 896,663 895,600

Employees 53,808 55,960 54,280 57,003 59,285 62,384 Suppliers 654,403 702,817 634,349 698,111 690,300 680,919 Depreciation and amortisation Expenses from ordinary activities (excluding borrowing costs expense)

Borrowing costs expense Operating profit before Income Tax from ordinary activities Income Tax Expense Net surplus or deficit attributable tothe Commonwealth

13,230 15,493 15,866 15,564 14,932 14,808

721,441 774,270 745,365 815,093 808,082 802,224 22,246 31,538 28,374 31,570 31,587 32,176

89,380 74,173 49,030 57,341 56,994 61,200 24,903 11,861 18,556 16,421 15,518 16,147

64,477 62,312 30,474 40,920 41,476 45,053


189

Table 3.1.2—Budgeted Balance Sheet Projected

Results 2007-08

$’000


$’000


$’000


$’000


$’000


$’000

ASSETS

Financial assets

Cash 34,430 43,055 62,736 39,738 43,571 46,932

Receivables 163,543 148,741 155,043 148,948 143,659 139,189

Accrued Revenue 18,032 18,737 15,701 16,803 17,855 18,941

Other Financial Assets

Total financial assets

Non-financial assets

22,986 23,785 20,213 20,960 21,358 20,587

238,991 234,318 253,693 226,449 226,443 225,649

Land and buildings

Infrastructure, plant and equipment

Inventories

1,360,410

12,490

683,191

1,352,277

10,501

762,406

1,307,838

13,344

726,031

1,317,137

14,765

787,168

1,303,638

16,600

828,584

1,272,560

18,503

880,224

Assets Held for Sale 30,851 43,154 54,077 51,710 40,705 67,685

Tax Assets

Total non-financial assets

Total Assets

LIABILITIES

14,963 13,092 25,052 21,921 19,181 16,783

2,101,905 2,181,430 2,126,342 2,192,701 2,208,708 2,255,755

2,340,896 2,415,748 2,380,035 2,419,150 2,435,151 2,481,404

Interest bearing liabilities

Loans 400,000 475,000 450,000 475,000 475,000 500,000

Provisions

Employees

Trade Creditors

8,866

4,981

10,138

5,033

10,032

4,451

11,510

4,483

13,047

4,516

14,677

4,491

Provision 110,865 104,807 67,679 67,884 68,096 68,316

Current Tax Liabilities 18,948 - 2,769 2,287 2,162 1,556

Provision for dividend - 42,137 39,402 37,224 38,726

Prepayment Received

Other Payables and Accrued Expenses

Total Payables and Provisions

Total liabilities

Equity

Contributed equity

Reserves

17,342

12,074

17,920

9,129

27,649

7,285

28,424

8,620

28,577

8,969

28,719

9,321

173,076 147,027 162,002 162,610 162,591 165,806

573,076 622,027 612,002 637,610 637,591 665,806

249,148

1,417,452

249,148

1,458,322

249,148

1,443,740

249,148

1,455,725

249,148

1,467,492

249,148

1,479,203

Total accumulated results

Total equity

Total liabilities and equity

101,220 86,251 75,145 76,667 80,920 87,247

1,767,820 1,793,721 1,768,033 1,781,540 1,797,560 1,815,598

2,340,896 2,415,748 2,380,035 2,419,150 2,435,151 2,481,404


190

Table 3.1.3—Statement of Cash Flows Projected

Results Forward Estimate

Revised Estimate

Forward Estimate

Forward Estimate

Forward Estimate

2007-08 2008-09 2008-09 2009-10 2010-11 2011-12 $’000 $’000 $’000 $’000 $’000 $’000

OPERATING ACTIVITIES

Cash received

Goods and services 785,411 825,755 776,929 842,952 834,622 830,424

Interest 8,372 2,217 4,282 6,561 6,953 9,902

GST 4,400 - 0 0 0 0

Other

Total cash received

Cash used

4 - 59 0 0 0

798,187 827,972 781,270 849,513 841,575 840,326

Employees 70,441 72,077 58,217 55,786 58,016 61,014

Payment to Suppliers 728,122 732,394 749,220 761,147 733,377 733,017

GST Payments to Suppliers 928 - 0 0 0 0

Tax 224 29,863 31,480 13,772 12,902 14,355

Interest

Total cash used

Net cash from/(used by) operating activities

INVESTING ACTIVITIES

27,336 31,538 28,374 31,570 31,587 32,176

827,051 865,872 867,291 862,275 835,882 840,562

(28,864) (37,900) (86,021) (12,762) 5,693 (236)

Cash received

Proceeds from sales of property, plant and equipment

Total cash received

Cash used

66,135 127,803 157,232 107,704 116,331 118,132

66,135 127,803 157,232 107,704 116,331 118,132

Purchase of property, plant and equipment

Total cash used

Net cash from (used by investing activities)

174,422 121,247 69,566 100,803 78,789 102,312

174,422 121,247 69,566 100,803 78,789 102,312

(108,287) 6,556 87,666 6,901 37,542 15,820

FINANCING ACTIVITIES

Cash received

Proceeds from loans 60,000 75,000 50,000 25,000 0 25,000

Proceeds from other activities

Total cash received

Cash used

-

60,000 75,000 50,000 25,000 0 25,000

Repayment of loans

Dividends paid

Total cash used

Net cash from/(used by) financing activities

Net increase/(decrease) in cash held

Cash at the beginning of the reporting period

Cash at the end of the reporting period

58,700 35,031 44,279 42,137 39,402 37,224

58,700 35,031 44,279 42,137 39,402 37,224

1,300 39,969 5,721 (17,137) (39,402) (12,224)

(135,851) 8,625 7,366 (22,998) 3,833 3,360

170,281 34,430 55,370 62,736 39,738 43,571

34,430 43,055 62,736 39,738 43,571 46,931


191

Table 3.1.4—Capital Budget Statement[1]

Projected Results

Forward Estimate

Revised Estimate

Forward Estimate

Forward Estimate

Forward Estimate

2007-08 2008-09 2008-09 2009-10 2010-11 2011-12

CAPITAL APPROPRIATIONS $’000 $’000 $’000 $’000 $’000 $’000

Total loans

Total 60,000 75,000 50,000 25,000 0 25,000

60,000 75,000 50,000 25,000 0 25,000 PURCHASE OF NON CURRENT ASSETS Funded internally by Departmental resources

TOTAL 125,000 48,000 66,000 55,000 65,000 70,000

125,000 48,000 66,000 55,000 65,000 70,000 Note 1. Table 4 shows purchases of property, plant and equipment and includes housing stock intended to be kept as

Defence Housing Australia core stock. Sale and Leaseback housing stock is now recorded as inventory. Cost of acquisition/construction of inventory is shown in Operating activities in the Statement of Cash Flows. Previously, costs of acquisition/construction of all housing stock, whether intended for sale or to be kept as core stock, was shown as Investing Activities.

Table 3.1.5: Non-Financial Assets – Summary of Movement (Budget Year 2008-09)


192

Gross Value as at 1 July 2007

Additions

Disposals

Revaluation increments

Land

$’000

Buildings

$’000

Total Land and Buildings

$’000

Other infrastructure

plant and equipment

$’000

Total

$’000

L&B IP&E

held for sale

$’000

Total

$’000

832,757

24,197

0

0

466,877

31,901

0

0

1,299,634

56,098

0

0

37,313

6,167

0

0

1,336,947

62,265

0

0

120,964

0

-114,781

0

1,457,911

62,265

-114,781

0

Transfers to Assets Held for

Sale -23,947 -23,947 -47,894 0 -47,894 47,894 0

Gross value 30 June 2008 833,007 474,831 1,307,838 43,480 1,351,318 54,077 1,405,395

Accumulated Depreciation as at 1 July 2007

Charge for the reporting

period

Disposals

Revaluations

Accumulated Depreciation as at 30 June 2008

Net Book Value as at 30 June

0

0

0

0

-11,871

11,871

0

-11,871

0

11,871

-26,141

-3,995

0

-26,141

-15,866

0

11,871

0

0

0

0

-26,141

-15,866

0

11,871

0 0 0 -

30,136 -

30,136 -

30,136

2008 833,007 474,831 1,307,838 13,344 1,321,182 54,077 1,375,259

Table 3.1.6—Defence Housing Australia (DHA) resource statement budget estimates for 2008-09 as at Budget May 2008

Estimate of prior year amounts Proposed Total Total

available in at Budget Estimate Estimate Source 2008-09 2008-09 2008-09 2008-09 $'000 + $'000 = $’000 $'000

Opening Balance/Reserves at Bank - -

REVENUE FROM GOVERNMENT

Ordinary Annual Services[1]

Outcome 1- Defence DHA:01 556,089 556,089 Total ordinary annual services 556,089 556,089

Total Annual Appropriations 556,089 556,089

Total Funds from Government 556,089 556,089 FUNDS FROM OTHER SOURCES

Interest 4,838 4,838

Sale of goods and services 220,857 220,857

Other 115 115

Total 225,810 225,810

Total net resourcing for Agency 781,899 781,899

Note 1. Appropriation Bill (No.1) 2008-09. 2. All figures are GST exclusive.

CRF - Consolidated Revenue Fund

DHA is not directly appropriated as it is a Commonwealth Authorities and Companies Act body. Appropriations are made to Department of Defence which are then paid to DHA and are considered 'departmental' for all purposes.


193

Documents

Defence Portfolio Additional Estimates Statements 2008-2009 · The purpose of the Portfolio Additional Estimates Statements (PAES), like that of the Portfolio Budget Statements, is